THE WELL-TH NOTES

By WealthTrust Advisors on July 12, 2024

Weekly data-driven insights on the markets and economy

Second Week of July 2024

1. Retreating From Highs – Following the CPI reading, the S&P 500 retreated from its record high as investors rotated out of the big technology names like Nvidia, Microsoft and Meta. The S&P 500 fell 0.7%, while the Nasdaq pulled back 1.7%, after also hitting a new record earlier in the trading day. The Dow Jones added 21 points, or 0.05%. Notably, Nvidia, which is up 165% on the year, lost 4%.[i]

2. Yield Dip – Treasury yields fell this week after indications of cooling inflation. The 10-year yield fell 8.2 bps to 4.2%, and the 2-year yield was down 12 bps at 4.51%. Investors are hoping to see the Fed begin easing rates this fall.[ii]

3. Inflation Cooling – The CPI, a broad measure of costs for goods and services, declined 0.1% from May, putting the 12-month rate at 3%, around its lowest level in more than three years. Core CPI, which excludes volatile food and energy costs, increased 0.1% monthly and 3.3% from a year ago. The annual increase for the core rate was the smallest since April 2021. A 3.8% slide in gasoline prices held back inflation for the month, offsetting 0.2% increases in both food prices and shelter.[iii]

4. Rate Cut Fall – Some investors watching the Fed have called for a cut in September following the June unemployment report that showed signs of a cooling labor market, with the unemployment rate ticking up a tenth of a percent for the second month in a row to 4.1%. While the 4.1% unemployment rate is still low, it’s up from 3.4% early last year. Though Chairman Powell declined to be more specific on rate cut timing, investors are betting on a better than 70% chance the Fed will initiate a cut for September.[iv]

5. Deplaning – Boeing said on Tuesday it delivered a total of 44 planes in June – more than any other month this year. However, this represented a 27% drop year-over-year amid a whirlwind of legal and production challenges. On Sunday, the U.S. Justice Department confirmed Boeing pleaded guilty to a criminal fraud conspiracy charge linked to two 737 MAX fatal crashes in 2018 and 2019, raising questions about the company’s ability to secure government contracts.[v]

6. Shrinkflation – While inflation may be cooling, consumers are taking to social media to share frustrations over shrinkflation, the practice of cutting an item’s size, but not its price. While grocery prices have risen just 1% in the past year, food at home prices have climbed more than 24% since May 2019, stretching consumers’ wallets and stoking anger with companies. Recently, Walmart, Chipotle and Wendy’s have received backlash from consumers.[vi]

7. Small Businesses, Big Dreams – The National Federation of Independent Business said on Tuesday its Small Business Optimism Index climbed 1 point to 91.5 last month, the highest level since last December. Still, June marked the 30th straight month that the index stayed below the 50-year average of 98 as inflation concerns and higher borrowing costs remained. Despite 37% of owners reporting job openings they could not fill, down 5 points from May, a net 22% of businesses planned to increase compensation in the next three months, up 4 points from May.[vii]

8. New Balance’s New Balance – As consumers look to shop post-pandemic and rush toward retro shoe styles, New Balance has seen plenty of momentum. New Balance’s 23% revenue growth between 2022 and 2023 outpaced that of Nike, Asics and Puma. This all comes as the global sneaker market continues to grow and is projected to top $80 billion this year. According to data from online marketplace StockX, New Balance owned five of the top 16 retro and running silhouettes shoppers were obsessed with in 2023.

[i] Evans, Brian and Lisa Kailai Han, “S&P 500 falls from record as investors rotate out of 2024 tech winners: Live updates,” CNBC, July 11, 2024, https://www.cnbc.com/2024/07/10/stock-market-today-live-updates.html. Accessed July 11, 2024.

[ii] Min, Sarah and Sophie Kinderlin, “10-year Treasury yield dives after June CPI unexpectedly decreases,” CNBC, July 11, 2024, https://www.cnbc.com/2024/07/11/us-treasurys-ahead-of-june-consumer-inflation-data.html. Accessed July 11, 2024.

[iii] Cox, Jeff, “Inflation falls 0.1% in June from prior month, helping case for lower rates,” CNBC, July 11, 2024, https://www.cnbc.com/2024/07/11/cpi-inflation-report-june-2024.html. Accessed July 11, 2024.

[iv] Schonberger, Jennifer, “Fed needs ‘more good data’ to feel comfortable about rate cuts: Powell,” Yahoo!Finance, July 9, 2024, https://finance.yahoo.com/news/fed-needs-more-good-data-to-feel-comfortable-about-rate-cuts-powell-140022637.html. Accessed July 11, 2024.

[v] Lampert, Allison, “Boeing deliveries drop 27% in June year-on-year,” Reuters, July 9, 2024, https://www.reuters.com/business/aerospace-defense/boeing-deliveries-drop-27-june-year-on-year-2024-07-09/. Accessed July 11, 2024.

[vi] Repko, Melissa and Amelia Lucas, “Inflation outrage: Even as prices stabilize, Walmart, Chipotle and others feel the heat from skeptical customers,” CNBC, July 8, 2024, https://www.cnbc.com/2024/07/08/inflation-walmart-chipotle-criticized-over-prices.html. Accessed July 11, 2024.

[vii] “US small business sentiment rises to six-month high in June,” Reuters, July 9, 2024, https://www.reuters.com/markets/us/us-small-business-sentiment-rises-six-month-high-june-2024-07-09/. Accessed July 11, 2024.