To The Moon

The major U.S. stock indexes each posted returns exceeding 3% as investors welcomed indications of a modest easing in inflation. For the $S&P 500(.SPX)$ and the $NASDAQ(.IXIC)$ , it was the fourth positive result in a rowꟷthe longest string of weekly gains since November 2021.

As of last Friday,$DJIA(.DJI)$ YTD is -6%, $NASDAQ(.IXIC)$ YTD is -16.2%,$S&P 500(.SPX)$ YTD is -9.3%. $S&P/ASX 200(XJO.AU)$ & $Straits Times Index(STI.SI)$ in YTD performance is -5.2% & 4.54% respectively.

Investors are betting that the FED will shift to a slower pace of interest rate hikes, and retail investors who have been silent for a long time are making a comeback. Stock purchases by retail investors rose 62% in the week to Tuesday, according to JPMorgan Chase & Co., while a basket of the most shorted stocks tracked by Goldman Sachs rose more than 30% over the same period. Shorts, who had been winners in the first half of the year by shorting stocks and bonds, suffered heavy losses as market sentiment reversed.

Macro Factors:

Inflation Moderation: Although U.S. inflation remains near its highest level since the early 1980s, the latest monthly Consumer Price Index report brought some relief, which triggered a stock market rally on Wednesday. Inflation rose at an annual 8.5% rate in July, marking a slowdown from the previous month’s 9.1% figure. Falling gasoline prices were largely responsible for the decline.

Price Pressures Ease: The day after the U.S. government reported a modest slowdown in consumer price inflation, a separate report showed a similar easing in suppliers’ wholesale prices. The Producer Price Index rose at a 9.8% annual rate in Julyꟷthe slowest pace since October 2021, and down from 11.3% in June of this year.

Improving Sentiment: A monthly gauge of U.S. consumer sentiment rose, marking the second monthly gain since it fell in June to the lowest level in records dating to 1952. Friday’s preliminary report from the University of Michigan’s consumer sentiment index also indicated that consumers’ future inflation expectations improved but remained elevated..

Small Caps Recapture Lead: A benchmark of U.S. small-cap stocks outperformed by a sizable margin for the week, moving ahead of a large-cap peer on a year-to-date basis. The Russell 2000 Index added around 5% for the week, despite pulling back sharply on Tuesday.

Sectors Performances:

The 11 major S&P sectors all ended higher last week. The Energy sector was the top gainer, closing up 5.9%, while the basic materials sector rose 5%. Real Estate rose4.87%, Financial sector rose 4.2%, Communication Services rose 3.92%, Industrials rose 3.8%, Consumer Cyclical rose 3.41%. The Utilities rose 3.18%, Technology rose 2.61%, Consumer Defensive sector rose 1.52%, the Healthcare sector rose 1.22%.

According to Factset, Excluding the energy sector, S&P 500 companies would be posting an overall earnings decline rather than an increase for the Q2  season that’s now wrapping up. The average 299% year-over-year surge reported by energy companies made the sector the biggest earnings growth contributor among all 11 sectors, according to FactSet.  Including energy, the S&P 500 was expected to record an average 6.7% earnings increase as of August 11; without that sector, earnings would shrink –3.7%.

Weekly Top Gainners of S&P 500：

$Nielsen Holdings PLC(NLSN)$ , $Albemarle(ALB)$ , $Principal(PFG)$ , $Devon(DVN)$ , $Viatris Inc.(VTRS)$ , $Walt Disney(DIS)$ , $Aptiv PLC(APTV)$ , $Generac(GNRC)$ ,$Cardinal Health(CAH)$ , $SVB Financial Group(SIVB)$ .

Other Markets:

VIX Calming trend: The 8% drop in $Cboe Volatility Index(VIX)$ that measures investors’ expectations of short-term U.S. stock market volatility marked the index’s eighth weekly decline in a row. The Cboe Volatility Index on Friday closed about 43% below a recent peak set in mid-June.

Oil Recovery: The price of U.S. crude $Light Crude Oil - main 2208(CLmain)$ rose, eclipsing the $90-per-barrel threshold that it had fallen below the previous week for the first time in more than five months. International oil prices stabilized and rebounded, with the easing of recession fears boosting market expectations after U.S. inflation pressures eased. The prospect of negotiations on the Iran nuclear deal is also a potential factor affecting oil prices.

Gold Futures Increasing: $Gold - main 2212(GCmain)$ closed up 1.36% last week, rising for the fourth consecutive week and setting the longest winning streak since the end of December 2021. The U.S. dollar index fell by more than 1%, and the inflation pressure in the United States eased significantly in July, but the underlying inflation pressure was still high, and the Fed's tightening policy expectations significantly eased, which limited the rise in gold prices.

The Week Ahead: August 15-19 

Notable Earnings: $Li Auto(LI)$ ,$Tencent Music(TME)$ ,$BHP Billiton(BHP)$ ,$Sea Ltd(SE)$ ,$Wal-Mart(WMT)$ ,$Home Depot(HD)$ ,$Agilent(A)$ ,$Target(TGT)$ ,$Tencent Holding Ltd.(TCEHY)$ ,$Kohl's(KSS)$ ,$Analog Devices(ADI)$ ,$Cisco(CSCO)$ ,$John Deere(DE)$ ,$Estee Lauder(EL)$ .

Monday

• No major reports scheduled

Tuesday

• Housing starts, U.S. Census Bureau
• Industrial production and capacity utilization, U.S. Federal Reserve

Wednesday

• Release of minutes from the July 26-27 meeting of the U.S. Federal Reserve
• Retail sales, U.S. Census Bureau
• Business inventories, U.S. Census Bureau

Thursday

• Existing home sales, National Association of Realtors
• Weekly unemployment claims, U.S. Department of Labor

Friday

• No major reports scheduled