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Last week, U.S. stocks delivered weekly gains driven by anticipation about the latest inflation data and the start of earnings season. Markets experienced a rotation on Thursday, with 10 out of 11 sectors gaining ground, pushing the S&P 500 to its 35th record high (up near 1.5%). The Dow Jones closed above 40,000 for the second time ever, finishing the week strong (up more than 2.0%). The Nasdaq also set new highs, finishing around 0.9% higher despite a tech sell-off last Thursday.

Sector Performance (Financials):

Q2 earnings season kicked off with JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC) reporting better than expected. Investment banking revenue increased due to a resurgence in deals, despite high interest rates impacting their loan and deposit businesses. Wells Fargo saw a year-over-year profit drop. All three banks’ stocks fell, reflecting investor caution.

Global Markets:

• European markets showed resilience, with the STOXX 600 adding about 1.5%, recovering from early losses and political uncertainty in France.

• Asian markets followed Wall Street's lead, with Taiwan, Japan, India, and South Korea setting new records. China saw gains due to state-funded ETF buying and new short-selling restrictions.

Fixed Income:

• The Bloomberg U.S. Aggregate Index traded higher, with the 10-year Treasury yield dropping over 0.09% and the 2-year yield dropping over 0.13%.

• Treasury yields remained steady early in the week but fell after cooler-than-expected CPI data, increasing hopes for rate cuts by September.

• Investment grade (IG) bond spreads remained tight, but the attractiveness of IG credit could diminish as yields fall.

Commodities:

• The Bloomberg Commodity Index: declined nearly 1.5%.

• Crude Oil: Fell over 0.7% due to high Russian output and a weak demand outlook in China, despite strong travel demand and seasonal trends.

• U.S. Dollar: Pulled back amid soft CPI data and decreased consumer sentiment, marking the second consecutive weekly decline.

• Gold: Gained around 1.0% for the third straight week, driven by rate-cut expectations.

• Silver and Copper: Both ended slightly lower.

• Grains like corn and wheat remained near 2024 lows.

US Economic Weekly Recap:

• Headline June CPI: Fell by 0.1% from May, with energy prices declining. Softer inflation could allow the Fed to cut rates in September. Services inflation rose by 0.1%, the smallest increase since mid-2021. Grocery prices continued to rise, impacting lower-income households. Airfare prices fell 5% despite strong travel demand.

Crypto Market Recap:

• SEC Drops Investigation into Stablecoin Issuer Paxos: The SEC decided not to take enforcement action against Paxos for its Binance-affiliated stablecoin, BUSD.

• Germany Continued to Sell Bitcoin: German authorities transferred 10,567 BTC to various crypto exchanges, reducing their holdings significantly.

• Bitcoin's Correlation with U.S. Equities Falls: The correlation between Bitcoin and major U.S. equity indices has dropped to multi-month lows.

Here are other key highlights from last week:

• Stocks and Sectors to watch as Biden and Trump vie for presidency

• Liquid Staking on Solana Soars To All-Time High

• SingularityNET and Filecoin partner for AI and DePIN

• PayPal's PYUSD stablecoin surpasses $500 million market cap

• Pudgy Penguins enables access to its virtual world with Web3 domains

• Anime Hit ‘Attack on Titan’ Coming to Ethereum Game ‘The Sandbox’

This is a key week in the markets!

Key U.S. Economic Events to Watch:

Monday, July 15:

• Empire State Manufacturing Index: Improved to -6.0 in June from -15.6 in May, the highest since February.

Tuesday, July 16:

• Retail Sales: Flat in June, exceeding expectations of a 0.3% decline, showing resilience in consumer spending.

Wednesday, July 17:

• Building Permits : Increased by 3.4% to 1.446 million in June.

• Industrial Production: Rose by 0.6% in June, indicating steady manufacturing output.

• Beige Book: Highlighted modest price increases and slight growth in economic activity.

Thursday, July 18:

• Initial Jobless Claims

• Philly Fed Manufacturing Index

Fed Speakers:

• Monday, July 15: Fed Chair Powell expressed confidence in inflation heading towards the 2% goal, potentially leading to rate cuts. FOMC Member Daly suggested one or two rate cuts could be appropriate soon.

• Tuesday, July 16: FOMC Member Kugler noted inflation's downward trend but highlighted the need for caution.

• Wednesday, July 17: FOMC Member Barkin commented on strong consumer spending and the reluctance of firms to lay off workers. FOMC Member Waller suggested a rate cut might be warranted soon.

• Thursday, July 18: FOMC Members Logan and Daly are scheduled to speak.

• Friday, July 18: FOMC Members Williams and Bostic are scheduled to speak.

Earnings Releases:

Notable earnings releases this week are outlined in the chart below.

Key Global Economic Events this week:

• Tuesday, July 16: Canada and New Zealand CPI.

• Wednesday, July 17: Australia Unemployment Rate.

• Thursday, July 18: UK Claimant Count Change and Euro Area Monetary Policy Statement.

• Friday, July 19: UK and Canada Retail Sales.

Trading Tip:

Diversify your portfolio to spread risk and achieve more stable, higher returns!

Week 7/08/24 - 7/12/24 Recap

Special Tools and Strategies

Understanding Stock Indexes and Securities

Every morning, millions of people tune into key numbers that hint at how the markets are performing. You might hear updates like "Dow up 240 points," "Gold is $2,463.00 a troy ounce," or "Oil is trading at $81.00 a barrel." These numbers provide clues about the financial landscape. In each issue, I provide a Market Recap of the previous week, discussing major market drivers such as the Dow, S&P 500, and Nasdaq indexes, the 10-year Treasury note, Bitcoin, major commodities like Oil and Gold, and notable stocks. But what are these indexes and securities? How do they work, and why do they matter? Here's what you need to know to keep up with the financial news:

S&P 500

• The S&P 500 measures the value of the 500 largest U.S. corporations by market capitalization listed on the NYSE or Nasdaq. It aims to provide a quick look at the stock market and economy.

• Companies are weighted by their float-adjusted market cap (shares available for public trading). The S&P skews toward larger companies, with tech stocks making up over a quarter of its value. The index is continuously recalculated based on available shares, with adjustments for stock splits, dividends, or spinoffs.

• With 500 stocks covering a broad range of industries, the S&P is considered the best indicator of large-cap stocks in the U.S. Its weighting method can introduce risk if overvalued stocks inflate the index.

Dow Jones Industrial Average (Dow)

• The Dow is a collection of 30 "blue-chip" U.S. stocks, including companies like JPMorgan Chase, Microsoft, UnitedHealth Group, and Amazon.

• The Dow is weighted by share price, so higher-priced stocks have more influence on the index's total value. If the price of any stock in the Dow changes by $1, it impacts the index equally, regardless of the stock's overall price.

• The Dow is a leading indicator of the stock market, though it only includes 30 companies, making it less representative of the overall market.

Nasdaq Composite

• The Nasdaq Composite is an index composed of over 2,500 stocks and other equities like American depositary receipts and real estate investment trusts, tracking securities on the Nasdaq exchange. Top companies include Apple, Microsoft, Nvidia, Alphabet, Tesla, and Meta.

• The Nasdaq is weighted by market cap (the number of outstanding shares multiplied by the share price), giving larger companies more influence. It's heavily skewed toward tech companies, which make up nearly half of its value.

• The Nasdaq has historically attracted tech-focused companies. Its tech-heavy nature can lead to volatility and may not always reflect the performance of other industries.

10-Year Treasury Note

• The 10-year Treasury note is a debt instrument issued by the U.S. government to fund itself, with the yield serving as a benchmark for other interest rates.

• The Treasury issues bonds auctioned to investment banks, which then sell them to investors. The 10-year matures over 10 years, with interest paid every six months until the full value is repaid.

• The 10-year is a safe-haven asset for investors. Higher demand lowers the yield, and it can sell for more than its face value, offering a low-risk investment.

Bitcoin

• Bitcoin is a cryptocurrency created in 2009 by a mysterious person or group known as Satoshi Nakamoto. It's decentralized, not run by any central authority, with a fixed supply cap of 21 million.

• Bitcoins are digital and maintained on a blockchain-based public ledger. Transactions and newly created bitcoins are verified on the ledger, making it transparent and difficult to cheat.

• Bitcoin is an alternative to government-issued currency, with low transaction fees and potentially lucrative investment returns. However, its price is highly volatile, and its regulatory environment is still evolving.

Gold

• Gold is a commodity with historical significance, often referred to in terms of its price per ounce. Investors can buy physical gold or intangible gold securities like futures, ETFs, or shares in gold mining companies.

• Gold is priced in U.S. dollars globally. It serves as a diversification tool or a "safe-haven asset" during economic or geopolitical uncertainty.

• Despite being seen as a relic by some, gold holds its value during uncertain times, making it a preferred asset for conservative investors.

Oil

• West Texas Intermediate (WTI) is the North American crude oil benchmark, sourced primarily from Texas and often refined into gasoline.

• WTI is traded on the New York Mercantile Exchange through oil futures contracts, allowing investors to buy "abstract oil." These contracts are eventually converted into physical oil, cashed out, or rolled into new contracts.

• Oil prices are influenced by economic conditions, supply and demand, and geopolitical forces. The COVID-19 pandemic caused a historic price collapse, showing how external factors can impact the market.

Stocks - Biggest Loser or Gainer

• Stocks are shares of a company that can be purchased and owned, usually in the form of common or preferred shares.

• Companies sell shares through an initial public offering (IPO) to raise funds. Share prices fluctuate based on supply and demand, market trends, and specific events affecting the company.

• Stocks can move with the broader market or due to isolated events like earnings reports, product launches, or executive changes. I will highlight individual stocks can explain why certain stocks were the biggest losers or gainers for the week.

By understanding these indexes and securities, you can better grasp daily financial news and make more informed investment decisions.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.