The market decided to take us on a rollercoaster that would make even the most iron-stomached trader queasy. By Friday’s close, we were pretty much where we started, give or take a few decimal points. The S&P 500 barely budged, the Nasdaq took a tiny 0.2% dip, and the Dow slipped 0.6%. Our small-cap friend, the Russell 2000, had a rougher go, tumbling 1.4%.
Monday kicked off with a global market tantrum that had us all reaching for the antacids. The Nikkei took a nosedive, plummeting 12%. It was like watching a game of financial dominoes, with U.S. equities following suit. This drama was all thanks to the unwinding of the yen carry trade as the Japanese currency flexed its muscles against the dollar.
But just when we thought the sky was falling, Tuesday rolled around, and the Nikkei bounced back with a vengeance, soaring 10%. It was like watching a cat land on its feet after falling off a high ledge. Still, the market kept glancing nervously over its shoulder, worried about more carry trade shenanigans.
As the week wore on, those recession jitters started to ease up a bit. The Atlanta Fed’s GDPNow model perked up, estimating Q3 real GDP growth at 2.9%, a nice bump from the 2.5% we saw on August 1. And let’s not forget the weekly jobless claims report, which showed initial claims dropping by 17,000 to 233,000. It’s like the economy decided to hit the gym and show off its muscles.
In the bond market, things got spicy. The 10-year note yield climbed 15 basis points to 3.94%, while its 2-year cousin jumped 18 basis points to 4.05%. This little dance compressed the 2s10s spread by three basis points to -11 basis points. It’s like watching a high-stakes game of financial limbo.
On the earnings stage, Eli Lilly stole the show, surging 10.8% after dropping some jaw-dropping numbers and guidance. It’s always nice to see a company knock it out of the park.
US Market Highlights
- Credit card debt hit a new high, reaching $1.14 trillion in Q2 2024. That’s a 5.8% jump from last year, with about 9.1% of these balances now in the danger zone of delinquency. As someone who’s seen a few market cycles, I can tell you this is like watching a pressure cooker with a wobbly lid.
- The U.S. service sector decided to shake off its blues in July. The ISM nonmanufacturing PMI bounced back to 51.4 from June’s 48.8. It’s like watching a boxer get back up after taking a hard hit.
- Delta Air Lines had a tech meltdown that would make any IT professional wince. They turned down help from both CrowdStrike and Microsoft, and the estimated cost? A cool $500 million. That’s enough to make even the most stoic CFO break out in hives.
- Jamie Dimon, the oracle of JPMorgan, is still seeing storm clouds on the horizon. He puts the odds of a “soft landing” at 35% to 40%. When Dimon speaks, it’s like E.F. Hutton in those old commercials – people listen.
- Tech giants Dell and Cisco wielded the job-cutting axe, with Dell slashing 12,500 positions and Cisco letting go of 4,000 workers. It’s a stark reminder that even in the land of silicon and dreams, job security can be as fleeting as a Snapchat message.
- Disney decided to hike prices for its streaming services, including Hulu, Disney+, and ESPN+. Interestingly, this came right after their streaming division posted its first-ever profit in Q2. It’s like they finally found the treasure map and decided to charge more for the adventure.
Global Highlights
- The Bank of Japan hit the brakes on its rate hike plans faster than a Tokyo bullet train, all thanks to market instability. The unwinding of the ‘Yen Carry Trade’ stirred up financial turmoil, sending the Nikkei Index into a 12% nosedive on Monday.
- China’s inflation decided to wake up from its slumber, with consumer prices rising 0.5% in July. Imports also jumped 7.2%, hinting at stronger domestic demand. It’s like watching a sleeping dragon slowly open one eye.
- The Reserve Bank of Australia kept interest rates steady and maintained its hawkish stance, stating that “inflation is proving persistent.” This effectively poured cold water on hopes for rate cuts later this year. It’s like watching a strict parent refuse to extend curfew.
- Canada’s service sector continued its contraction last month, with the S&P Composite PMI dipping to 47.0 from 47.5 in June. New business declined while wage costs kept inflation pressures high. It’s like watching a see-saw where both ends are trying to go down.
- China launched its first satellites to rival Starlink in a project named “Thousand Sails.” They’re aiming to build a constellation of 15,000 low-orbit satellites for global internet coverage. It’s like watching a new player confidently sit down at a high-stakes poker game.
Commodities & Crypto Corner
Oil prices bounced back this week, with Brent crude hovering around $79.1 and WTI at $75.50 a barrel. Geopolitical tensions in Ukraine and the Middle East, along with improved U.S. economic data, gave oil a boost. It’s like watching a heavyweight boxer get a second wind.
Base metals continued their downward slide, with copper falling to $8,794 per tonne in London. Gold, meanwhile, held steady at $2,425, benefiting from expectations that the Fed might ease up on its monetary policy. It’s like watching gold play musical chairs and always finding a seat.
The crypto market had its own wild ride. Bitcoin (BTC) took a 12% dive on Monday but rallied to end the week up 3.72%, hovering around $60,300. More than $300 million vanished from Bitcoin Spot ETFs in the U.S. between Monday and Tuesday. It’s like watching a magician’s disappearing act, only with real money.
Calendar – The Week Ahead
Next week, all eyes will be on inflation data. The July Producer Price Index and Consumer Price Index readings are due on Tuesday and Wednesday, respectively. We’ll also get retail sales data on Thursday. It’s like waiting for your report card, but for the entire economy.
The earnings season continues with several big names stepping up to the plate, including Walmart, Home Depot, Cisco, Alibaba, and Deere. It’s like a financial version of the All-Star game.
As we wrap up, here’s a financial fact to chew on: Historically, the stock market has returned an average of about 10% annually before inflation. But remember, past performance is about as reliable a predictor of future results as a fortune cookie is of your love life.
Stay curious, stay informed, and most importantly, stay cool under pressure. As the great Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” Until next week, this is Irving Wilkinson, signing off and heading to my favorite watering hole for a well-deserved martini. Cheers!
