July 26, 2024

Stocks got a boost from fresh inflation data today and finished sharply higher ahead of the weekend. June headline PCE rose +0.1% and +2.5% YoY as expected, while core-PCE came in at +0.2% from +0.1% the prior month, and unchanged YOY at +2.6%. Other components in the PCE suggested consumer spending and income remained steady which could permit the Federal Reserve to lower interest rates in September. Yields slipped lower with the 10-year Treasury closing at 4.198% and the two-year T-Bill at 4.396%, a five-month low. Earnings also gave stocks a lift with Decker Outdoor (DECK), Norfolk Southern (NSC), 3M (MMM) and Bristol-Myers (BMY) all surging after beating estimates. One of the few casualties was a -40.66% plunge in DexCom (DXCM) after missing and lowering guidance. Homebuilders were a winner from lower rates with the US Home Construction ETF (ITB) gaining +3.44% and posting a new record high. Every sector participated in the rally led by strong moves in Communication Services (XLC), Industrial (XLI), REITs (XLRE), Materials (XLB) and Financial (XLF). Tech stocks also bounced led by a +1.95% jump in semiconductors. The major averages came off the highs at the close but held solid gains at the closing bell. The DJIA picked up 654.27 points (+1.64%) and finished at 40589.34, while the S&P 500 gained 59.88 points (+1.11%) and settled at 5459.10. The NASDAQ added 176.16 points (+1.03%) closing at 17357.88.

Breadth was positive with advancing issues beating declining issues 4.5:1 on the NYSE and 2.5:1 on the NASDAQ. Advancing volume was 81% on the NYSE and 67% of the NASDAQ. The VIX dropped 2.07 (-11.21%) and closed at 16.39. Crude oil prices lost 1.53 (-1.95%) and the September contract closed at $76.75 a barrel. Gold prices jumped 30.00 (+1.27%) and finished at $2383.50 an ounce. Bitcoin (BTC) closed the session at $67,700.

A volatile week closed out mixed with the DJIA, DJ Transportation Index and small cap Russell 2000 trading higher, while the S&P 500 and NASDAQ were lower for a second straight week. Expect volatility to linger next week as investors comb over a busy week of earnings that will include heavyweight's Apple (AAPL) and Microsoft (MSFT). In addition, the July FOMC Meeting gets underway on Tuesday with Fed Chair Jerome Powell's press conference at 2:00 PM ET Wednesday.

Earnings releases to watch for on Monday include: ON Semiconductor (ON), F5 Inc (FFIV) and Loews (L).

Monday's Market Moving Economic Calendar: Dallas Fed Manufacturing Survey.

By David L. Blake, CMT