Economic Events and Market Outlook: Week of July 22-26, 2024

4 Economic Events That Could Affect Your Portfolio This Week, July 22 - 26, 2024

Markets sailed to new records in the first half of the week, only to see the rally get smothered on Wednesday. The rest of the week marked one of the largest stock declines this year. The S&P 500 (SPX) clocked its worst week since April, diving by almost 2%, while the Nasdaq Composite (NDAQ) dropped by 3.7% and the large-cap tech benchmark Nasdaq-100 (NDX) tumbled by nearly 4%. In contrast, the Dow Jones Industrial Average (DJIA) managed to finish the week in the green, up by 0.7%, helped by its strong surge in the first half of the week on the back of the continued rotation towards value shares. The VIX Volatility index - the measure of market anxiety - surged to its highest levels since April. Markets entered the historically weak period of July and August with optimism, but the mood in the tech sector began to sour earlier this month. Recent economic data along with Jerome Powell's remarks have convinced investors that the Fed will begin rate reductions in September. This outlook accelerated the attempts at rotation out of tech stocks, widely perceived as overvalued, into more cyclically oriented sectors that are expected to gain the most from the Federal Reserve's rate cuts. Amid heightened investor nervousness towards tech, several developments have coincided to trigger this week's downfall of semiconductor stocks, starting with soft sales guidance from the world's most important high-end chip machinery maker ASML (ASML). Later reports that the Biden administration is considering clamping down further on the chip equipment sales to China reverberated through the whole semis sector. Adding to the rotation imperative, as the odds of Donald Trump's election victory rose, the markets began to embrace the so-called "Trump trades," including banks, defense, and traditional energy stocks. Trump added to technology's woes on Wednesday, saying that Taiwan should pay the U.S. for its defense against possible Chinese hostility. The shares of the world's largest chip foundry Taiwan Semiconductor Manufacturing (TSM) tumbled on the news. TSM makes about 90% of the most advanced semiconductors used in AI applications; its fate is crucial not only for chipmakers but for the entire global economy. Speculations about Joe Biden dropping off the election race have intensified, driving a sharp rise in the perception of political uncertainty and adding to investor anxiety. As clouds gathered towards the end of the week, the winners of the previous sessions - small caps, financials, and healthcare shares - also sharply declined. Four Economic Events Here are four economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar. " July's S&P Global Manufacturing PMI and Services PMI (preliminary readings) - Wednesday, 07/24 - The Manufacturing PMI captures business conditions in the manufacturing sector and is considered an important indicator of business conditions and the overall economic climate in the U.S. The Services PMI captures business conditions in the services sector; it is a crucial indicator since this sector is responsible for over 70% of total U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy. " Q2 2024 GDP Growth Annualized (advance estimate) - Thursday, 07/25 - This report will provide an early insight into a change in GDP in the previous quarter. Economists project that the pace of growth quickened to 2% in the second quarter, up from Q1's 1.4% annualized rate. The increase is due to the estimated growth in personal spending, which has been on the rise as inflation has cooled in recent months. A higher-than-forecasted reading could lead to a delay in expectations for Fed rate cuts. " June's Core Personal Consumption Expenditures (Core PCE) - Friday, 07/26 - This report reflects the average amount of money consumers spend monthly, excluding seasonally volatile products such as food and energy. FOMC policymakers use the annual Core PCE Price Index as their primary inflation gauge. Core PCE inflation slowed in May on an annualized basis, with markets expecting that the disinflation trend has continued over the past few months, supporting the odds of a September rate cut. " July's Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) - Friday, 07/26 - These reports portray the results of a monthly survey of consumer confidence levels and consumers' views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The inflation expectations index is used as a component of the Fed's Index of Inflation Expectations calculations. For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The Week That Was, The Week Ahead: Macro & Markets, July 21, 2024

Markets sailed to new records in the first half of the week, only to see the rally get smothered on Wednesday. This turned out to be the worst day for the Nasdaq Composite (NDAQ) since 2022. The S&P 500 (SPX) dropped sharply, while the large-cap tech benchmark Nasdaq-100 (NDX) tumbled, clocking in its largest daily drop in almost a year. The sharp market declines were led by semiconductor stocks, with the iShares Semiconductor ETF (SOXX) plunging by over 7%, their worst slide since the COVID-19 panic in early 2020. The S&P 500 clocked in its worst week since April, diving by almost 2%, while the Nasdaq Composite dropped by 3.7% and the large-cap tech benchmark Nasdaq-100 tumbled by nearly 4%. In contrast, the Dow Jones Industrial Average (DJIA) managed to finish the week in the green, up by 0.7%, helped by its strong surge in the first half of the week on the back of the continued rotation towards value shares. The VIX Volatility index - the measure of market anxiety - surged to its highest levels since April. All Chips on Politics Markets entered the historically weak period of July and August with optimism, but the mood in the tech sector began to sour earlier this month. Recent economic data along with Jerome Powell's remarks have convinced investors that the Fed will begin rate reductions in September. This outlook accelerated the attempts at rotation out of tech stocks, widely perceived as overvalued, into more cyclically oriented sectors that are expected to gain the most from the Federal Reserve's rate cuts. Amid heightened investor nervousness towards tech, several developments have coincided to trigger this week's downfall of semiconductor stocks, starting with soft sales guidance from the world's most important high-end chip machinery maker ASML (ASML). Later reports that the Biden administration is considering clamping down further on the chip equipment sales to China reverberated through the whole semis sector. Adding to the rotation imperative, as the odds of Donald Trump's election victory rose, the markets began to embrace the so-called "Trump trades," including banks, defense, and traditional energy stocks. Trump added to technology's woes on Wednesday, saying that Taiwan should pay the U.S. for its defense against possible Chinese hostility. The shares of the world's largest chip foundry Taiwan Semiconductor Manufacturing (TSM) tumbled on the news. TSM makes about 90% of the most advanced semiconductors used in AI applications; its fate is crucial not only for chipmakers but for the entire global economy. Sector Rotation or Market Correction? The notion that a trade war with China is expected to aggravate no matter who wins the election took steam out of the semiconductor trade, while also weighing on the wider tech universe. The "Magnificent Seven" megacap stocks tumbled on Wednesday, taking the S&P 500 down with it. However, the Dow rallied on that day, marking the first time in 25 years that the blue-chip index rose while the S&P 500 declined more than 1%. Still, the rotation theme lost steam on Thursday, which quickly turned into a brutal market-wide sell-off as investor sentiment slumped. Speculations about Joe Biden dropping out of the election race intensified, driving a sharp rise in the perception of political uncertainty and adding to investor anxiety. As clouds gathered, the winners of the previous sessions - small caps, financials, and healthcare shares - also sharply declined. CrowdStrike Strikes the Tech Crowd On Friday, investor sentiment was further dented following an unprecedented IT systems outage caused by a flawed software update by cybersecurity firm CrowdStrike (CRWD) that led to a crash in Microsoft's (MSFT) Windows systems. The outage affected millions of people around the globe, disrupting flights, TV programs, banking operations, and crippling everyday activities for plenty of businesses, governments, and individuals. Although CrowdStrike said it issued a fix early on Friday, a complete solution is expected to take some time. In New York, trading opened as usual, but market participants continued to receive signals of outages from across the country until the closing bell. This, of course, did nothing to lift previously downtrodden spirits, with the stock markets continuing their across-the-board slide. Looking for Guidance Technology stocks were in the spotlight for all the wrong reasons in the past week, but this week they have a chance at a comeback. As Q2 earnings season heats up, three of the "Magnificent Seven" pack are slated to report, along with several other large-cap tech companies. Earnings from the tech sector as a whole are expected to have grown by double digits year-over-year, though this could pose as a double-edged sword. On the one hand, if tech leaders beat expectations again, it could add some tailing to the flagging tech rally. On the other hand, many of the high-flying names could suffer a "sell the news" moment, especially given current investor anxiety. In addition, guidance for future quarters might prove even more influential as past achievements seem to be fully priced in. Stocks That Made the News ¤ NVIDIA (NVDA) led the sell-off in semiconductor stocks this past week, falling by almost 9%. Apart from general chip wobbles, NVDA has been pulled down by competition concerns. According to reports, Broadcom (AVGO) discussed making an artificial intelligence chip for OpenAI, the company behind ChatGPT, as it is looking to reduce its dependence on NVIDIA. ¤ Starbucks (SBUX) gained nearly 6% on reports that activist investment company Elliott Investment Management has built a sizable stake in the company and was discussing ways to move the chain's stock price higher. ¤ CrowdStrike (CRWD) plunged almost 18% last week after its software caused global computer systems to crash. ¤ Netflix (NFLX) declined after its quarterly report reflected a strong increase in customer count, though weak guidance for third-quarter subscriber additions disappointed. This week, the Q2 2024 earnings season is going into high gear, with multiple newsworthy earnings releases scheduled for this week. For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.