Wall Street ended the week higher during a holiday-shortened trading day, led by tech stocks. The Dow Jones Industrial Average was up less than 1% for the week. The S&P 500 and Nasdaq both closed at all-time highs on Friday, and were up about 2% and 3.5%, respectively, for the week. The first week of July continued the strength seen in June, the second quarter, and the first half of 2024. The S&P 500 Technology sector was the big winner last week, with Apple and Broadcom topping the club. Consumer Discretionary and Communications Services, featuring club names Meta Platforms and Alphabet, also held strong. Energy led the decline this week, followed by Healthcare and Capital Goods. Looking back on a short week due to an early close on Wednesday and a holiday on Thursday, there were some notable updates on the economy and announcements from club-owned Constellation Brands.Corona and Modello brewers reported decent quarterly results on Wednesday, and shares initially surged on the news. We advised our members to take profits on Constellation just before the market opened. However, the weak performance of the wine and spirits business remains an issue that management must address in the coming quarters. Shares closed down more than 3% on Wednesday, but regained most of the ground on Friday for a relatively flat week. Lower bond yields helped fuel Friday’s big gains, buoyed by a rise in the unemployment rate to 4.1% in June and a slightly better-than-expected increase of 206,000 nonfarm payrolls. Wage inflation was in line with expectations. Overall, the government’s monthly employment report card supported the case that the Federal Reserve will cut interest rates at its September meeting. The market expects it to be the second rate cut in December, but the Fed predicted only one rate cut this year after its June meeting. Last week also saw the release of a manufacturing update.On Monday, the ISM Manufacturing Purchasing Managers Index for June was weaker than expected, suggesting a faster contraction than expected, and on Wednesday factory orders for May showed a month-over-month decline versus expectations of a small increase. The ISM Services PMI for June, released on Wednesday, also disappointed, showing a contraction in the services sector. Economists had expected an expansion. These numbers also gave the Fed the green light to start cutting interest rates. I hope you all have a good Fourth of July and a relaxing weekend. Believe it or not, earnings season is back and you’ll want to take advantage of this lull. Three of the big four money center banks, including the club name Wells Fargo, will report their earnings this Friday. The government will also release important data on consumer price inflation and wholesale price inflation. Economic Data: The June Consumer Price Index (CPI) will be released on Thursday morning, and the June Producer Price Index (PPI) will be released on Friday morning. Of the two, the Consumer Price Index (CPI) carries more weight because it more accurately represents what consumers are paying for a basket of goods from one year or month to the next. This is the Fed’s main concern. But PPI is important to track because it shows what’s going on at companies’ cost input levels. This speaks to margin dynamics and therefore can inform both profitability and what pricing actions companies may have to take in the future to ensure profitability. In the CPI data, be sure to keep an eye on the housing component, which has been a big pain point for the Fed. Housing is a barometer of how much people pay for housing and has proven to be a very troubling source of inflation. This is a problem because it represents a large and unavoidable cost for most Americans. As of Friday, for the headline CPI, economists are expecting a 3.1% increase for the year, according to FactSet. Core CPI, which excludes food and energy prices, is expected to increase 3.5% year over year.If that happens, it will be a slight deceleration at the headline level but a slight acceleration at the core level. For the producer price index, economists expect a 2.3% increase year-over-year at the headline level and a 2.5% increase year-over-year at the core level. These numbers would be slightly higher than what we saw in May. Earnings Season: Within the portfolio, the outlook for net interest income (NII) will be a key item of interest when Wells Fargo reports its quarterly earnings this Friday. At an industry conference on Tuesday, CFO Michael Santomassimo reiterated his expectation that NII will be down 7% to 9% year-over-year. We believe this outlook may still be conservative, as the Fed’s high-for-long interest rate policy is generally a tailwind for net interest income. However, other factors, such as weak loan demand, prevented Wells Fargo from raising its outlook this year. Given the recent strength in the stock prices of Wells Fargo and our other club bank, Morgan Stanley, we booked some profits last Friday.Morgan Stanley is scheduled to report earnings on Tuesday, July 16th. Now that the stress test results are in, we will also want to hear management’s thoughts on the pace of share buybacks in the second half of the year. Both Wells Fargo and our other bank, Morgan Stanley, passed the test, indicating they have strong capital positions with excess cash to return to shareholders. Other items to watch in Wells Fargo’s report include any comments on the state of consumer savings, signs of more purchasing power, and the real estate market, which we have been watching closely as the world finds its new post-COVID normal. Monday, July 8th No major events Tuesday, July 9th No major events Wednesday, July 10th No major events Thursday, July 11th 8:30 AM ET: Consumer Price Index 8:30 AM ET: Initial Jobless Claims Pre-Bell Earnings Releases: PepsiCo (PEP), Delta Air Lines (DAL), Conagra Brands (CAG) Friday, July 12th 8:30 AM ET: Producer Price Index Pre-Bell: Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) (For a complete list of Jim Cramer’s charitable trust stocks, click here.) Subscribers to Jim Cramer’s CNBC Investment Club receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in the charitable trust’s portfolio. If Jim talks about a stock on CNBC television, he waits 72 hours after issuing the trade alert before executing the trade. The above Investment Club information is subject to our Terms of Use and Privacy Policy, as well as our Disclaimer. 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The American flag is seen raised over the New York Stock Exchange building on Independence Day, July 4, 2024, in New York, USA.
Beata Saurzel | Noor Photo Getty Images
Wall Street ended the week higher after a holiday-shortened trading day, led by technology stocks.
