Market Highlights

Economic

• June consumer confidence rose to 109.7, above expectations, as inflation came down
• Retail sales rose 0.4% in June, with auto sales at 15.7 million units, above estimates
• Non-farm payrolls increased to 209,000, below estimates of 230,000
• Unemployment fell to 3.6%, with underemployment falling to 6.9%
• U.S. industrial production fell - 0.5%, in June, after a drop of -0.2% in May
• Housing prices continue to rise, as 30-year fixed mortgages rates stand at 6.9%
• New home construction numbers were 1.43 million in June, below estimates
• Existing home sales were down at 4.1 million in June, as mortgage applications dropped
• U.S. manufacturing is contracting, with June ISM at 46, below estimates
• Personal income was up 0.4% and consumer spending was up 0.1% in May
• GDP was up 2.0% in the first quarter of 2023, with 2nd quarter estimated to grow 1.8%

Inflation

• June core inflation was 3% for CPI and 0.1% for PPI on a year-over-year basis, below estimates
• Crude oil rose to $78 off the recent low of $67, as OPEC continues to cut production
• Inflation is starting to come down from its highs but is still above the Fed target

Monetary Policy

• The Fed increased the Fed Funds rate to 5%- 5.25% and the Discount Rate to 5.25%
• The Fed is expected to raise rates by 25 basis points in July and possibly in September
• The Fed will remain data dependent, as more economists move to soft landing scenario

International

• Russia puts down Wagner Group rebellion as the group turned back from Moscow
• China meets with Secretary Blinken, Janet Yellen, and Henry Kissinger to ease tensions
• The Dollar has come down versus other currencies as BRIC’s try to create alternative
• U.S. soldier defects to North Korea after being released from jail in South Korea

Interest Rates

• Ten-year Treasury yields fell from 4.05% to 3.8%, as a soft landing looks possible
• Secure overnight finance rate SOFR, inter-bank lending standard, is 5.35%
• Mortgage rates may have peaked at 7.4%, as the 30-year fixed rate decreased to 6.8%
• Yields on international debt have remained positive, ending the free money period

Earnings

• S&P 500 companies reporting 75% are beating earnings and 61% revenue
• Second quarter earnings are projected to be down -9%, the largest drop since Q2, 2020
• Markets are forward looking and are focused on 2024 earnings for S&P 500 of $250

Market Outlook

• In 2023, the S&P 500 is up 16.9 % and the tech heavy Nasdaq market is up 32%
• Market volatility has come down as the banks have stabilized
• Technology, Communication Services, and Consumer Discretionary were the best performing sectors
• The S&P 500 is trading at 19.1 times forward earnings, above its 25-year average

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