A record-high inflation report, the prospects of a more aggressive Fed, and growing recession fears sent stocks lower– though losses were pared by a Friday rally.
For the week the Standard & Poor’s 500 lost 0.93%, while the Dow Jones Industrial Average slipped 0.16%. The Nasdaq Composite index dropped 1.57% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.49%. 1,2,3
The S&P index is still in positive territory for July with a month-to-date gain of 2.1%, but as of Friday's close it was down ~19% for the year to date.
As the week opened, recession fears intensified with reports of renewed Covid-related lockdowns in China. Also, the U.S. dollar continued to climb, reflecting global economic weakness.
June's consumer price index report showed price increases accelerating. Year-over-year prices jumped 9.1%, the fastest pace in over 40 years. Speculation grew that the Federal Reserve might contemplate a 100 basis point increase in short-term rates later this month, rather than the 75 basis point hike it earlier signaled. The market rebounded on Friday following comments by an Federal Open Market Committee member who said he favoring a 75 basis point hike. Also helping the Friday rally was a strong retail sales report and additional second-quarter company reports.4
The increasing strength of the U.S. dollar moved to center stage last week as the dollar index (a measure of the U.S. dollar to six other major currencies) reached a fresh high, while the euro fell to parity with the dollar and to its lowest level since 2002. 5
A rising U.S dollar is always a mixed blessing. When the dollar rises, there are problems:
And there are Benefits:
Greater insight into the extent of that impact may be gained as companies provide forward guidance with their upcoming reports.
By the Way
The price of gasoline did NOT hit an all-time high last month despite what the sensationalist media kept screaming. In 1978 (BLS stats only go back that far) gas was $0.65/gallon, which equates to $5.41 in today's inflation-adjusted dollars. (LINK)
Another way to look at it is the cost to drive a mile, which factors in the average efficiency of cars on the road. By that measure 2008 was the peak (when the self-described "oil man" George W. Bush was president.) (LINK)
Yesterday I saw a station selling for $4.29 (we are in Maine for a few weeks.)
I expect that inflation has peaked. I may certainly be wrong. We'll see.
This Week: Key Economic Data
Tuesday: Housing Starts.
Wednesday: Existing Home Sales.
Thursday: Jobless Claims. Index of Leading Economic Indicators.
Friday: Purchasing Managers' Index (PMI) Composite Flash.
Source: Econoday, July 15, 2022
This Week: Companies Reporting Earnings
Monday: Bank of America (BAC), International Business Machines (IBM), The Goldman Sachs Group (GS), The Charles Schwab Corporation (SCHW)
Tuesday: Netflix, Inc. (NFLX), Johnson & Johnson (JNJ), J.B. Hunt Transport Services, Inc. (JBHT)
Wednesday: Tesla, Inc. (TSLA), Abbott Laboratories (ABT), CSX Corporation (CSX), United Airlines Holdings, Inc. (UAL)
Thursday: AT&T, Inc. (T), Snap, Inc. (SNAP), Blackstone, Inc. (BX), American Airlines Group, Inc. (AAL), Union Pacific Corporation (UNP), D.R. Horton, Inc. (DHI)
Friday: Verizon Communications, Inc. (VZ), Schlumberger Limited (SLB), American Express Company (AXP), NextEra Energy, Inc. (NEE), PPG Industries, Inc. (PPG)
Source: Zacks, July 15, 2022
"When you come to the end of your rope, tie a knot and hang on."
– Franklin Delano Roosevelt
Recovering Documents Following a Natural Disaster
If you live in an area that’s prone to natural disasters, it’s important to be prepared by knowing how to manage your important documents and paperwork, and by knowing what to do if those materials are lost. Here are some tips from the IRS:
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov6
Everything You Need to Know About Walking Meditation
You’ve likely heard about sitting meditation, where you’re encouraged to find a comfortable place to sit or lay down, but have you ever heard of walking meditation?
Walking meditation follows similar principles to sitting or lying meditation, but instead of staying in the same place, you direct your focus to your footsteps and the experience of walking. The goal is to be mindful of every step and experience something that we usually do automatically. You can focus on the mechanics of each step, your breathing, or the sights and smells on your walk. And you don’t have to walk far to enjoy the benefits! A quick, 10-minute walk will leave you more focused, mindful, and centered.
Tip adapted from Greater Good in Action at Berkeley7
You have 9 seemingly identical cubes before you. You are told that one is heavier than the other eight. Using a two-pan balance scale only twice, how can you pick out the heaviest cube?
Last week’s riddle: Two in every corner, one in every room, none in a house. What is it? Riddle answer: The letter "R."
Licancabur Volcano, Atacama desert, Chile
Footnotes and Sources
2. The Wall Street Journal, July 15, 2022
3. The Wall Street Journal, July 15, 2022
4. The Wall Street Journal, July 13, 2022
5. CNBC, July 11, 2022
6. IRS.gov, May 16, 2022
7. Berkeley.edu, May 26, 2022
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Weekly Market Insights: Friday Rally Stems Week of Losses
July 18, 2022