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Financial Market Update – Week of 07/24

July 24, 2023

Major U.S. stock market indexes traded in a mixed fashion last week–with sector rotation on display. A big week full of corporate earnings and the Fed is now on deck.

Tallying last week, the S&P 500 was higher by 0.69%, the Nasdaq 100 was lower by 0.90%, and the Dow Jones Industrial Average was higher by 2.08%.

Dow Jones Industrials Lead the Way

When was the last time you heard that one? Well, last week (perhaps courtesy of some mega cap tech earnings and guidance that underwhelmed investors), we saw the old-school Dow 30 leading the way, indicating sector rotation and potential further broadening of the recent stock market rally.

The Dow has seen ten consecutive positive trading sessions–its longest rally since 2017. Who doesn’t love a solid dividend-paying industrial stock? Diversification is key.

Fed Meeting Expectations

Even as inflation has been cooling, the Fed remains in the spotlight as the July meeting approaches on July 26th.

Expectations as of last Friday’s market close have virtually cemented the likelihood of a 25 basis point hike this week. Weekly closing data showed a 99.2% probability of such an occurrence, according to the CME FedWatch Tool. 

Looking beyond the July meeting, what will Chair Powell broadcast about the next Fed meeting (September)? The CME FedWatch Tool shows a probability of 83.5% that the Fed will leave rates unchanged in September–as of the time of writing.

Jackson Hole Symposium

While there is no Fed meeting in August, there will be the annual Jackson Hole Symposium–which is known for monetary policy moves and plans. 

The title theme of this year’s gathering of global monetary policy leaders is “Structural Shifts in the Global Economy,” and will take place Aug. 24-26.

Economic Data Incoming

Consumer Confidence, Advance GDP, Unemployment Claims, and the Core PCE Price Index are all on the calendar. We know the Fed will be paying attention to their favorite inflation indicator in Core PCE on Friday, even though it comes after the rate decision on Wednesday.

Are you craving more economic data? Here is a solid great write-up on this week’s economic data releases.

The Takeaway

Consider the market environment a year ago compared to now. All anyone wanted to consider was the Fed a year ago–and how big rate hikes would be. It’s now a different story, with more emphasis on corporate earnings and guidance along with sector rotation. It is a healthier investment environment overall.

Market narratives are dynamic, and we are now seeing a more healthy narrative with an earnings-driven stock market combined with a Fed-driven one. 

The July 26th Fed meeting has market expectations of producing a 25 basis point hike, according to the CME FedWatch Tool. Market watchers will pay attention to the statement and subsequent press conference for clues regarding the Fed’s outlook for the remainder of 2023.


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