The major averages all gained for another winning week, capping the best month for stocks in 2022. It was also a week that perfectly exemplified why it’s often the expectations that matter far more than the actual numbers reported. On the macro front, in addition to a 75 basis point rate hike from the Federal Reserve on Wednesday, we got the advance read on the second-quarter gross domestic price index that pointed to the second consecutive quarter of economic contraction. Historically, two consecutive of GDP contractions would indicate an economic recession. However, historically you also don’t see a 3.6% unemployment rate during a recession. Call it whatever you want but the one thing that’s clear is the economy is slowing. Then, on the earnings front, we heard from the mega-cap names responsible for over 20% of the S & P 500’s market valuation. And despite mixed results and guidance from all of them, these stocks (with the exception of Meta Platforms) managed to react positively. So, arguably worrisome economic data combined with mixed earnings releases. Yet we managed to rally with the Dow gaining nearly 3% for the week, the S & P 500 advancing 4.2% on the week and the Nasdaq jumping 4.7%. In our view, this ability for the market to shrug off these weakening economic conditions and mixed earnings results from key stock market bellwethers is a sign that investors were expecting these updates and may have finally priced the economic reality into the market, providing the ingredients needed to put in a near-term bottom. While that doesn’t mean we shoot higher in a straight line, it does give cause to be more optimistic as we move forward and some breathing room to allow the economic picture to further develop. Before moving on, one last note on the hotter-than-expected inflationary reading. While it was above expectations, it is important to remember that these readings are backward looking (it was a June reading and we are now at the end of July). As a result, investors may not be putting as much weight on the print given the Federal Reserve did raise rates this week by 75 basis points. That plus plus quarterly earnings commentary from management teams we got this week trump the outdated data. Under the hood this week, all S & P sectors closed higher with energy leading to the upside, followed by utilities and industrials. Meanwhile, the U.S. dollar index held steady at around the 106 level. Gold stands at about $1,760 per ounce. WTI crude prices remain at just under $100 per barrel. The yield on the 10-year Treasury pulled back to the 2.65% level. Looking back We received earnings results from Microsoft (MSFT), Alphabet (GOOGL), Humana (HUM), Meta Platforms (META), Qualcomm (QCOM), Ford (F), Linde (LIN), Honeywell (HON), Apple (AAPL), Amazon (AMZN), Chevron (CVX), AbbVie (ABBV) and Procter & Gamble (PG). On the macroeconomic front: On Tuesday, new home sales were reported to have fallen 8% in June and 17% annually. Then on Wednesday, pending home sales were reported to have fallen 8.6% in June and 20% annually, missing estimates. Also Wednesday, the Federal Reserve raised interest rates by 75 basis points. On Thursday, we got the advance read on second quarter GDP , which pointed to a 0.9% contraction, missing expectations for a 0.3% expansion. Also Thursday, initial jobless claims for the week ended July 23 came in at 256,000, missing expectations of 250,000. Finally, on Friday, we got the June Personal Spending report, which indicated a 4.8% annual increase in the core PCE price index (the Fed’s preferred measure of inflation), slightly hotter than the expected 4.7%. What’s ahead Within the portfolio, we will hear from Devon Energy (DVN) on Monday after the close; from Advanced Micro Devices (AMD) and Coterra Energy on Tuesday after the bell; and from Eli Lilly (LLY) on Thursday before the opening bell. Here are some other earnings reports and economic numbers to watch in the week ahead: Monday, August 1 Before the bell: Builders FirstSource (BLDR), Jacobs Engineering (J), Global Payments (GPN), ON Semi (ON), JELD-WEN (JELD), Aerojet Rocketdyne (AJRD), Affiliated Managers (AMG), Check Point Software (CHKP) After the bell: Mosaic (MOS), Aflac (AFL), CF Industries (CF), Avis Budget (CAR), Univar Solutions (UNVR), DaVita (DVA), Diamondback Energy (FANG), Williams Cos (WMB), Sanmina (SANM), Activision Blizzard (ATVI), Leggett & Platt (LEG), Simon Property (SPG), Arista Networks (ANET), Pinterest (PINS), Vornado Rlty (VNO) 10:00 a.m. EST: ISM Manufacturing PMI Tuesday, August 2 Before the bell: Marathon Petrol (MPC), Caterpillar (CAT), Uber (UBER), Cummins (CMI), Eaton (ETN), Lear (LEA), Marriott (MAR), Illinois Tool (ITW), Leidos (LDOS), DuPont (DD), Henry Schein (HSIC), S & P Global (SPGI), Molson Coors (TAP), JetBlue (JBLU), Arconic (ARNC), KKR (KKR), Ferrari (RACE), IDEXX Labs (IDXX), Tower Semi (TSEM) After the bell: Prudential (PRU), Occidental Petro (OXY), Starbucks (SBUX), PayPal (PYPL), Gilead (GILD), Caesars Ent (CZR), AirBnB (ABNB), GXO Logi (GXO), Electronic Arts (EA), Cirrus Logic (CRUS), SoFi (SOFI), Alteryx (AYX) Wednesday, August 3 Before the bell: CVS (CVS), AmerisourceBergen (ABC), Enterprise Products (EPD), CDW (CDW), Sunoco (SUN), Trane (TT), Exelon (EXC), Moderna (MRNA), Berry Global (BERY), BorgWarner (BWA), Regeneron (REGN), Yum! Brands (YUM), Under Armour (UAA), Vertiv (VRT), Spirit Aero (SPR), Generac (GNRC), Brinks (BCO), Horizon Pharma (HZNP) After the bell: McKesson (MCK), Energy Transfer (ET), MetLife (MET), Nutrien (NTR), Plains All American (PAA), Allstate (ALL), Lumen Tech (LUMN), Lincoln National (LNC), Booking Holdings (BKNG), DXC Tech (DXC), MGM (MGM), MercadoLibre (MELI), Altice (ATUS), eBay (EBAY), Marathon Oil (MRO), Clorox (CLX), Sprouts Farmers (SFM), Albermarle (ALB), Ingersoll-Rand (IR), Qorvo (QRVO), Realty Income (O), 10:00 a.m. EST: Factory Orders 10:00 a.m. EST: ISM Services PMI Thursday, August 4 Before the bell: Alibaba (BABA), Cigna (CI), ConocoPhillips (COP), Arrow Electric (ARW), CBRE Group (CBRE), Paramount Global (PARA), Johnson Controls (JCI), WestRock (WRK), NRG Energy (NRG), Duke Energy (DUK), Becton Dickinson (BDX), Aptiv (APTV), Parker-Hannifin (PH), Kellogg (K), Wayfair (W), Air Products (APD), Zoetis (ZTS), PerkinElmer (PKI), Crocs (CROX), AZEK (AZEK), Datadog (DDOG), Shake Shack (SHAK) After the bell: Suncor Energy (SU), Warner Bros Discovery (WBD), Amgen (AMGN), Corteva (CTVA), EOG Resources, Block (SQ), Opendoor Tech (OPEN), Carvana (CVNA), Live Nation (LYV), XPO Logi (XPO), Con Edison (ED), AES (AES), Motorola Solutions (MSI), Rocket Companies (RKT), DoorDash (DASH), Skyworks (SWKS), Lyft (LYFT), Twilio (TWLO), Dropbox (DBX), Universal Display (OLED) 8:30 a.m. EST: Initial Jobless CLaims Friday, August 5 Before the bell: Goodyear Tire (GT), Western Digital (WDC), Telus (TU), Flour (FLR), Adient (ADNT), Wabtec (WAB), DraftKings (DKNG), Canopy Growth (CGC), Twist Bio (TWST) 8:30 a.m. EST: Nonfarm Payrolls (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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The major averages all gained for another winning week, capping the best month for stocks in 2022. It was also a week that perfectly exemplified why it’s often the expectations that matter far more than the actual numbers reported.
