For the month, the small-cap Russell 2000 index has produced returns of over 10%, outperforming both the S&P 500 and Nasdaq indices.
The S&P 500 is reporting a mixed bag of results for the second quarter of 2024. Despite this mixed picture, the index constituents are reporting higher earnings for the second quarter, achieving their highest year-over-year earnings growth rate since Q4 2021. Eight out of eleven sectors are reporting year-over-year earnings growth, with four sectors reporting double-digit growth: Communication Services, Information Technology, Financials, and Health Care.
Earlier this month, CrowdStrike issued an update to its users around the world that contained a bug causing worldwide havoc, leading to Microsoft Windows operating systems crashing and vital services being unable to access their systems, causing unprecedented global disruption. The share price has been hammered by over 25% since the incident. Poor earnings reports from Tesla and Alphabet triggered major sell-offs among 2024’s leading Tech stocks last week. This week’s earnings slate will play a role in determining whether tech stocks are able to bounce back as Microsoft, Meta Platforms, Apple, and Amazon set out to report their quarterly results in the coming days.
In the latest inflation data released last Friday, the (PCE) Personal Consumption Expenditures price index was shown to have cooled by 0.1% to 2.5% in June in line with market forecasts, helping pave the way for a widely anticipated September interest rate cut. However, Fed officials have been cautious in their remarks and have stressed that there is no set policy path, with data guiding the way. US economic activity exceeded expectations in the second quarter. The real Growth Domestic Product (GDP) for Q2 grew at an annualised rate of 2.8%, surpassing the anticipated 2.1%.
The Stoxx Europe 600 declined 1.25%, and stocks were unsteady as markets await rate decisions and earnings reports. The inflation rate dropped by 0.1% to 2.5% for June 2024. Prices eased in the food and energy sectors but remained steady for services at 4.1%. A member of the ECB board stated the EU still faces a tough ‘last mile’ in its fight against high inflation, as evidenced by stubbornly high growth in the prices of services. Interest rates were held steady for the month. However, the ECB signalled that September’s meeting would be ‘wide open’ as it downgraded its view of the Eurozone’s economic prospects.
The blue-chip FTSE 100 index was up 1.3%, while the mid-cap FTSE 250 index gained over 6% in July. The UK economy grew by 0.4% in May, according to flash figures published by the Office for National Statistics this month. UK’s inflation held steady at the Bank of England’s 2% target in June, while its services inflation — which is closely watched by the BOE, given its dominance within the U.K. economy and its reflection of domestically-generated price rises — remained at 5.7% in June. As the Monetary Policy Committee is set to meet on Thursday, the 1st of August, investors are eyeing a potential lowering of its benchmark interest rate by 25 basis points to 5.00%, which will be its first rate cut since 2020.
Japan’s Nikkei 225 was down 2.79% for the month. On the 30th, the Bank of Japan kicked off its two-day monetary policy meeting. The BOJ is expected to raise its benchmark interest rate and trim its Japanese government bond purchases. Currently, Japan’s headline inflation stands at 2.8% for June, unchanged from May; however, core inflation, which strips out prices of fresh food, accelerated to 2.6% from 2.5%. While inflation has been meeting and even overshooting the BOJ’s target rate, the central bank has been focused on confirming a “virtuous cycle” of higher wages and boosting prices, seen as a prerequisite for rate hikes.
China’s GDP growth for the second quarter rose by 4.7%, missing expectations of a 5.1% growth and slower than the 5.3% year-on-year GDP increase in the first quarter. Retail sales in June grew at a slower pace, while industrial production beat expectations. While China’s exports rose by a more-than-expected 8.6% from a year earlier, there are notable uncertainties about the future due to trade tensions.
A sharp retreat in crude oil prices, found them at their lowest in more than a month, with renewed cease-fire negotiations in the Israel-Hamas war and demand worries weighing on the market.
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The views and opinions expressed should not be construed as investment or financial advice. The information contained is for educational purposes only.