Mid-Week Market Minute 7.17.24

Stocks Continue Climb; Retail Sales Beat Expectations

Stocks continued to march higher this week as market breadth expanded, led by the resurgence in small cap stocks which have rallied more than 10% over the past week. As of Tuesday’s close, the Russell 2000 was officially more than four standard deviations above its 50-day moving average, a historical move for any major index. Large caps participated in the recent rally as well, with the Dow Jones Industrial Average tacking on more than 3% over the past week, outperforming the tech-heavy Nasdaq index, which fell about 0.75% over that time frame.

Strong earnings paired with softer inflation and the prospects for lower interest rates seem to be the primary catalyst behind the ongoing momentum in stocks. On Tuesday morning, retail sales came in much better than expected, helping further validate the soft-landing narrative. Retail sales for June were expected to have fallen 0.3%, but instead came in flat for the month. The higher-than-expected retail sales report led to an upward revision in the Atlanta Fed’s GDP Now model, which is now forecasting 2.5% real GDP growth for the second quarter of 2024. 

Meanwhile, inflation data continues to move in the right direction, and Fed Chair Jerome Powell noted on Monday the Fed did not need to wait until inflation reached 2% to begin cutting interest rates. In response to the data and comments this week, the markets now are expecting with near certainty the Fed will enact their first rate cut in September, after telegraphing the move at the next meeting on July 31.

Source: GSAM, CNBC, JPMorgan, FactSet

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