Market Minute

Weekly analysis from the FS Investments Research team
Listen to the podcast. Read the report. Start your week up to date.

July 22, 2024

Download the report

Listen to the latest Market minute report

Equities

U.S. stocks continued their remarkable rotation as small caps and rate-sensitive stocks trounced megacap tech. The Russell 2000 has gained 7.80% over the last two weeks while the Nasdaq 100 has shed -4.26%, the largest two-week gap in performance since 2002. The combination of a friendly CPI report and increasing odds of a Trump election victory has been a boon for high-beta equities, though the trend showed signs of exhaustion by week’s end. All told, the S&P 500 fell -1.97% as the Magnificent 7 detracted -130 bps on the week. Bank earnings have thus far been mixed, with strong trading results offsetting weaker interest margins; earnings kick into gear this week, with bellwethers Tesla, Visa, and Alphabet reporting.

Fixed income

U.S. Treasury yields extended their post-CPI decline for much of the week before rebounding to end the week, The 10-year yield ended at 4.24% while the 2-year yield rose to 4.51% as traders continue to oscillate between two and three rate cuts this year. The Bloomberg Agg fell -0.33% while credit was more constructive.

Commodities

Oil prices ended the week down slightly, rising midweek as the dollar weakened before moderating into week’s end as rates rebounded and the dollar gained. Another large drawdown in crude inventories – the third in as many weeks – steeled the market’s confidence that demand remains solid. Gold fell slightly, moving opposite interest rates, while copper plunged -6% as China continues to disappoint on the stimulus front.

Economic overview

Data were stronger than expected last week, including a 0.0% gain in retail sales (vs a small expected decline) and a 0.9% m/m increase in the “control” group that aligns with GDP. This caused the Atlanta Fed’s GDPNow model to rise to 2.5% in Q2 vs 2.0% previously. Industrial production growth also surprised to the upside, up 0.6% m/m when a 0.3% gain was expected. Strong auto and energy production drove industrial activity in June. Housing starts and building permits bounced more than expected in June after falling in May, but remain at depressed levels. Finally, initial jobless claims rose to 243,000 in the week ending July 13, and continuing claims hit 1.87 million, the highest since the COVID recession.