Mid-Week Market Minute 08.17.22

Market Updates

Stocks were essentially flat in early trading this week as investors weighed upbeat earnings against mixed economic data. Earnings generally were positive this week as markets digested a plethora of reports from big-box retailers. Shares of Wal-Mart rallied more than 5% on Tuesday after beating both top-and bottom-line expectations, despite cautioning on its full-year outlook just three weeks earlier. Interestingly, Home Depot (HD) reported better-than-expected second-quarter results despite several signs of weakness in housing. In commodities, oil is trading around six-month lows amid recessionary concerns and a weakened demand outlook.

On the economy, housing data continues to point toward signs of weakness. Housing starts in July fell a worse-than-expected 9.6% from June to mark its worst reading since February 2021. Building permits declined 1.3% in the same period, its slowest pace since September 2021. Separately, industrial production increased a stronger-than-forecasted 0.6% in July, rising for the first time in three months. Meanwhile, U.S. retail sales were unchanged in July against expectations of a 0.1% increase. The print marks a slowdown from June’s 0.8% gain and comes as falling gasoline prices should help relieve pressure on household budgets. Overseas, consumer price inflation in the United Kingdom jumped to 10.1% year-over-year in July, its highest print since February 1982, due to soaring energy costs. The Bank of England has stated this is unlikely to be peak inflation, as it is expected energy prices will rise sharply when the price cap is lifted in October.

Looking forward to the rest of the week, investors will look to the Federal Open Market Committee’s July meeting minutes for hints surrounding the future course of policy. In addition, markets will be digesting remarks from several key Fed officials alongside housing and labor market data.

Source: GSAM, CNBC, JPMorgan

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