Weekly Market Recap: July 22, 2024 – July 26, 2024 

This week was marked by significant economic events and data releases that had a considerable impact on the financial markets. Key highlights included the US Core Durable Goods Orders, addresses by Federal Reserve Chair Jerome Powell, US GDP growth data, New Home Sales figures, Germany’s Ifo Business Climate Index, and the Bank of Canada’s interest rate decision. Additionally, movements in Gold and Crude Oil inventories, stock market reactions to disappointing company earnings reports, and broader market sentiment played crucial roles in shaping market dynamics.

BoC Interest Rate Decision

The decision had a mixed impact on the US Dollar vs. the Canadian Dollar, which remained volatile throughout the week and closed 0.8% higher than the previous week.

The Bank of Canada has cut the overnight rate by 25 basis points to 4.5% for the second consecutive meeting, which aligns with economists’ and market participants’ expectations.

Bank of Canada Governor Tiff Macklem has indicated that the bank is currently focused on preventing price pressures from slowing down too much and is mindful of potential risks such as slow growth, consumer spending, and the unemployment rate, which currently stands at 6.4% – higher than pre-pandemic levels.

Macklem emphasized that it is “reasonable” to expect further interest rate cuts but clarified that the bank will make decisions on a case-by-case basis.

New Home Sales of new single-family houses in the US fell to an annualized rate of 617,000, down by 0.6% in June 2024 from the previous month as elevated mortgage rates, near 7%, continue to keep buyers on hold. The sales price averaged $487,200, and the median sales price of newly sold homes in June 2024 was $417,300.

Germany Ifo Business Climate Index

According to the Ifo Institute, business sentiment in Germany has notably deteriorated. The Ifo Business Climate Index dropped to 87.0 points in July, down by 88.6 points in June. Companies expressed less satisfaction with current business conditions. The business climate declined in both the manufacturing and services sectors. The retail sector also saw a worsening business climate, and the index fell in the main construction industry. Looking ahead to the coming months, there has been a noticeable increase in skepticism, and expectations remained almost unchanged, reflecting clear pessimism.

USA GDP Q/Q

The most recent GDP report indicated that the economy of the United States grew by 2.8% in the second quarter of 2024, exceeding the anticipated 2.0% expansion. The primary contributors to this growth were consumer spending and business investments, although the pace of growth was slowing down. While this data briefly boosted the US dollar, it also raised concerns about the sustainability of economic growth.

Core PCE Price Index m/m

The report on Durable Goods Orders revealed a significant plunge of 6.6%, signaling weakening demand for long-lasting manufactured goods. This negative figure underscores the underlying weakness in the manufacturing sector, spreading disappointment in market sentiment. According to the US Census Bureau, the fall was mostly due to transportation equipment, which declined by 20.5%. Excluding transportation, Core Durable Goods Orders rose by 0.5%.

Core PCE Price Index m/m

The Federal Reserve’s preferred measure of inflation index showed a modest increase of 0.2% in June, meeting economists’ estimates. According to the Bureau of Economic Analysis, there was a 2.6% increase compared to a year ago, which stimulated discussions for a rate cut in the Fed’s next meeting in September

Crude Oil prices have declined due to the global economic slowdown and the relatively strong US dollar. Although there was a larger-than-expected reduction in Crude Oil inventories, it only offered temporary support for Oil prices.

According to the Energy Information Administration, the US witnessed a decrease of 3.7 million barrels in commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) from the previous week, marking the third consecutive weekly decline. The current US crude oil inventories amount to 436.5 million barrels, which is approximately 5% lower than the five-year average for this time of year. Gold managed to rebound on Friday and concluded the week with a slight decrease of 1.17%.

• S&P 500 declined by 0.85%
• DJIA was down by 1%
• NASDAQ 100 retreated by more than 2.5%

Tesla experienced another challenging quarter because of ongoing margin pressures in the competitive electric vehicle market.

Tesla shares plummeted over 11% after missing consensus estimates.

Ford Motor Co. saw its shares plummet by 18.5% last week, marking its largest decline due to a significant earnings miss.

Despite surpassing consensus estimates, demonstrating strong growth, and showing several positive aspects in its financial results, Alphabet’s stock plunged by over 8%. Many analysts attribute the decline to a larger-than-anticipated capital expenditure figure, which has raised investor concerns.

Investors speculate that the Fed will initiate interest rate cuts in September, leading to a market rotation from large to small caps, potentially benefiting small-cap shares.

The week ended with a mixed bag of economic data and market reactions. While the US GDP growth provided optimism, other indicators, such as new home sales and the Ifo Business Climate Index, highlighted ongoing challenges. The Federal Reserve’s cautious tone and the Bank of Canada’s rate cut underscored the delicate balancing act central banks face in managing growth and inflation. Investors remain focused on upcoming economic data and central bank actions, which will continue to shape market movements in the weeks ahead.