Despite the indecision of Nasdaq participants at the close of trading, Wall Street once again ended the day in a noticeable rising! The S&P 500 index rose 0.24% to 4,565 points. This is a good performance relative to what we have seen before. The Dow Jones continued its uptrend, closing in positive price territory for the eighth day in a row, contrary to some of the negative predictions we saw back in early July 2023. The New York index now stands at 35,061 points, a gain of +0.31%. The Nasdaq added 0.03% to reach 14,358 points.
After market trading will be busy with financial results from Tesla, Netflix and IBM, among others. This is the first major test for major US tech stocks, which have been the driving force behind the US market rally in recent months, which is not the first time they have had to do so. So they have to be convincing in their reports or it could pull the entire US stock market down with them and repeat the situation we saw in 2022!
As far as the global economy is concerned, investors are increasingly playing the "soft landing" scenarios for the economy despite the recent mixed statistics - yesterday's consumer spending and industrial production data and today's housing starts data. Either way, the apparent weakening of inflation gives the Fed more room to maneuver in the event of an unpleasant surprise. To summarize, the market and the economy have recently performed much better than expected at the beginning of the year and through the spring of 2023.
Ahead of the July 25 and 26 monetary policy meeting, the FedWatch tool gives a quarter-point probability of a Fed rate hike, which would take the federal funds rate to 5.25-5.5% above the 99% level. This could well be the last range before further easing in the first half of 2024. FedWatch now gives a 99.8% probability of a rate hike. This probability is due to the fact that the economy has once again performed better than expected and therefore the Fed is less afraid of undervaluing economic growth by raising rates.
New housing starts in the U.S. reached 1.434 million units in June 2023, down from FactSet's forecast of 1.483 million units and the previous month's downwardly adjusted figure of 1.559 million units. Meanwhile, building permits totaled 1.44 million units, also below the 1.48 million units forecast and the previous month's reading of 1.496 million units.
A report from the U.S. Department of Energy released Wednesday shows that domestic crude oil inventories (excluding the Strategic Petroleum Reserve) for the week ended July 15 were down 0.7 million barrels from a week earlier, while gasoline inventories fell by 1.1 million barrels. Meanwhile, distilled product inventories remained stable at last week's level.
Elsewhere in the world, European inflation offered few surprises today. Eurozone inflation was confirmed at 5.5%, in line with expectations, while the final harmonized core reading also came in at +5.5% compared to the previous estimate of 5.4%. Thus, according to Eurostat, Eurozone inflation slowed to 5.5% year-on-year in June from 6.1% in May, with underlying pressures easing. Compared to May, the European standard price index rose 0.3%. Experts had forecast a worse performance. Core inflation, which excludes volatile elements in the form of energy and unprocessed food, was 6.8% year-on-year in June, up from 6.9% in May. In contrast, the narrower measure excluding alcohol and tobacco products rose to an annualized rate of 5.5% in June from 5.3% in May. Overall, forecasts both at the start of 2023 and in late spring were less optimistic and as a result it is safe to say that the European economy performed well in June relative to what had been predicted.
UK inflation in June was more moderate than expected, with adjusted CPI rising 6.9% in June and for the year versus consensus of 7%, and inflation in European harmonized data at 7.9% versus consensus of 8.1%. UK producer prices were also a pleasant surprise.
The oil market is characterized by high volatility. After a strong start to the day, the price of West Texas Intermediate (WTI) crude oil fell 0.11% to $75.3 per barrel. North Sea Brent crude oil also lost 0.1%, falling to $79.46.
In currencies, the dollar fell another -0.18% to 0.8911 against the euro.
An ounce of gold is worth $1,977 (€1,761). Bitcoin is still near the $30,000 mark at $29,962.
* Carvana (+40.2% to $55.8). A huge boost for the U.S. used car retailer. The company just closed a deal to reduce its debt by $1.2 billion. "This transaction significantly enhances our financial flexibility by reducing total debt, extending maturities and lowering short-term interest expense as we continue to execute on our plan to deliver significant profitability and return to growth," said CFO Mark Jenkins. The company also announced quarterly results: auto sales missed expectations, while revenue and earnings beat consensus.
* Northern Trust (+13.36% to $81.28). The private bank specializing in asset management reported lower results. Revenue fell 1% to $1.77 billion. Profit attributable to shareholders was $324 million, or $1.56 per share, down from $388 million a year earlier.
As you can see the banking crisis in America never had any impact on the U.S. economy or the global economy. Yes, the medium-term outlook suggests some possible difficulties, but if the same dynamic in all key economies continues, it could mean a significant reduction in the likelihood of recession in key Western economies.
Slower rate hikes are also expected to have a positive impact on economic conditions in the second half of summer 2023.