Stock Market Update Thursday July 25, 2024 Equity markets exhibited volatility today, with an initial decline followed by a midday rally, ultimately succumbing to bearish pressure. The S&P 500 and Nasdaq 100 closed down 0.5% and 1.1%, respectively, while the Russell 2000 (small-caps) bucked the trend with a 1.2% gain.
Away From Stocks: The Treasury yield curve flattened, with the 2-year yield rising 4 basis points to 4.41% and the long bond yield declining to 4.5% from 4.54%. WTI crude oil prices edged above $78 per barrel, gold prices fell to $2,364 per ounce, Bitcoin dipped below $65,000, and the VIX volatility index remained elevated above 18. Reserve bank credit contracted by $9.7 billion over the past week, bringing the Federal Reserve's portfolio of interest-bearing assets to $7.166 trillion. This represents a $42 billion decrease since late June and a 19.7% reduction from its peak in March 2022.
This divergence between large-cap and small-cap indices suggests a shift in market sentiment favoring smaller companies, continuing the trend that started on July 11th.
Today's macro data presented an upside surprise to GDP, which came in at 2.8% versus the anticipated 2%. Additionally, the Core PCE Price Index exceeded expectations, potentially fueling optimism for stronger figures in tomorrow's data. However, the economic acceleration surpassing forecasts, coupled with better-than-expected Jobless Claims, complicates the Fed's task and likely diminishes the likelihood of a July rate hike. The bond market, which had rallied sharply in anticipation of this data, retreated slightly, closing down 1%.
U.S. equity markets exhibited notable volatility today. The SPY (SPDR S&P 500 ETF) initially declined nearly 1% at the open but staged a robust rally, reversing losses to achieve modest gains by midday. The Nasdaq 100 mirrored this trajectory. Interestingly, the Russell 2000 Index (small-caps) displayed relative strength, gaining 2% during the morning session even as broader market indices struggled. However, the afternoon session saw a reversal, with the SPY's earlier gains dissipating and closing down 0.5%. Despite this, the Russell 2000 remained the day's outperformer, adding 1%. This divergence between large-cap and small-cap indices suggests a shift in market sentiment favoring smaller companies, continuing the trend that started on July 11th.
Tomorrow Macro Data:
7/26 Fri
8:30 AM ET: Jun Core PCE (0.17% expected)
10:00 AM ET: Jul F U. Mich. 1yr Inf Exp.20
Today, we received a sell signal for the SPY ETF. Consequently, we advise exercising caution regarding the acquisition of S&P 500 stocks at this time.
The technical analysis of the SPY ETF suggests a bearish cycle for the next couple of weeks, extending into early August. We will monitor the situation closely and wait for a buy alert signal before initiating any accumulation of SPY positions.
