Mid-Week Market Minute 7.26.23

Market Updates

Stocks Higher; Key Inflation Data This Week

Stocks continued to march higher this week as investors digested second-quarter earnings results ahead of results from the latest Federal Reserve meeting, which concludes Wednesday afternoon. Earnings from the technology sector have been mixed so far this week with both Google and Microsoft reporting Tuesday. Google rallied about 6% on Wednesday as strength in its cloud business bolstered second-quarter profits. On the other hand, shares of Microsoft were lower by about 4% after issuing lighter-than-expected guidance for the remainder of this year. On the banking front, PacWest announced it will be acquired by Banc of California to create a new firm, Pacific Western. Boeing popped 4% after reporting a second-quarter beat thanks to a pickup in commercial aircraft deliveries. Coca-Cola added more than 1% after the soft-drink company raised its full-year outlook, while AT&T gained more than 1% after beating second-quarter free cash flow estimates. 

Outside of earnings, investors will have plenty to chew on the rest of the week from a data standpoint. The Federal Reserve meeting for July concludes on Wednesday afternoon, and markets are unanimously expecting an additional 25-basis-point rate hike at the conclusion of today’s meeting. This would take the funds rate to a target range of 5.25% to 5.50%. More importantly, the Fed’s policy decision will be followed by a news conference with Fed Chair Jerome Powell. Given the next Fed meeting will not occur until Sept. 19-20, any guidance and outlook from Powell will be closely monitored for clues to future policy. Beyond the interest rate decision, investors will assess several key releases on the economic data front. The first estimate of second-quarter gross domestic product (GDP) will be released on Thursday, with a consensus estimate from economists of a 1.5% annual growth rate for the quarter. This consensus is below the estimate of the GDPNow (Atlanta Fed) model, which estimates growth of 2.4% for the quarter. In addition to GDP, investors will get another look at inflation on Friday, where the headline PCE Price Index is expected to fall from 3.8% to 3.0% for June, while the Core PCE Price Index is expected to drop from 4.6% to 4.2%.

Source: GSAM, CNBC, JPMorgan

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