 Stocks ended July mixed despite the Fed signaling an interest rate coming in September and tech stocks staging a big rebound. The DOW reached the 40,000 mark back in May for the first time in 139 years, but this was the first time the index closed above 40,000 for the month. Traders acknowledge it’s a milestone, but from a practical point of view, there’s not that much difference between 39,999 and 40,000. Consumer Spending Rises 0.3% Consumer spending rose 0.3% in June after inching up 0.2% in May. Adjusted for inflation, real consumer spending rose 0.2% in June. Americans continued spending cautiously, putting most of their money toward services and experiences. The ransomware attack that crippled a critical program used by car dealers depressed spending on autos. The personal savings rate dipped to 3.4%, the lowest level since December 2022. The decrease was in line with expectations. Overall the data did nothing to dampen expectations the Fed will cut interest rates at their meeting in September. Consumer Prices Fall 0.1% The Consumer Price Index (CPI) fell 0.1% in June after being unchanged in May and year-over-year inflation slowed to 3.0% after falling to 3.3% in May. It was the first drop in consumer prices since the start of the pandemic. Core prices rose 0.1% in June after rising 0.2% in May and year-over-year inflation cooled to 3.3% after falling to 3.4% in May. Core goods prices were unchanged and core services prices rose just 0.2%, the smallest monthly increase since September 2021. Results were better than expectations and cheered markets. The core CPI inflation rate peaked at a 40-year-high of 6.6% in September 2022. The Personal Consumption Expenditures price index (PCE), the inflation gauge the Fed relies on as a measure of how the economy is doing compared to the Fed’s 2.0% inflation target, slowed to 2.5% year over year from 2.6% in May. Consumer Confidence Rises to 100.3 
Unemployment Rises to 4.3% 
Chicago PMI Falls to 44.3 The Chicago PMI fell to 44.3 in July after rising to 47.4 in June. It was the seventh monthly decline in the past eight months and left the index well below the break-even point of 50. Economists had expected the PMI to drop to 44. The Index has been below the break-even level of 50 for the past 21 months. Looking back to when the series began in 1967, the PMI has ranged from 20.7 in June 1980 to 81.0 in November 1973. Wholesale Prices Rise 0.2% The Producer Price Index (PPI) rose 0.2% in June and the original 0.2% decline reported for May was revised upwards. The PPI was up 2.6% year over year. Stripping out volatile food and energy prices, core PPI was unchanged in June after rising 0.2% in May and was up 3.0% in June after rising 2.6% year over year in May. PPI peaked at an 11.7% year-over-year increase in March 2022. The hotter-than-expected reading put a damper on excitement over falling consumer prices. Q2 GDP Grows 2.8% Q2 GDP grew 2.8%, well above expectations and the 1.4% growth recorded in Q1, according to the first reading from the Commerce Department. The jump primarily reflected an upturn in private inventory investment and an acceleration in consumer spending, partially offset by a downturn in residential fixed investment, which declined at a 1.4% seasonally adjusted annualized rate after jumping a whopping 16% in Q1. Consumer spending rose 2.3% after rising 1.5% in Q1. Goods surged 2.5% after falling 2.3% in the first quarter, and services increased 2.2% after rising 3.3% increase in the first. The personal consumption expenditures price index (PCE) increased 2.6% during the second quarter, the slowest pace since the first quarter of 2021 and a big slowdown from the 3.4% pace in Q1. Core PCE inflation, which excludes food and energy prices, increased 2.9% during the second quarter, down from 3.7% in Q1. Fed Holds Rates Steady The Fed held interest rates between 5.25% and 5.5% for the eighth consecutive meeting at their latest policy meeting the end of July but Fed watchers think it is very likely the Fed will cut rates at their next meeting September 18. Powell said earlier in the month that now that inflation has come down and the labor market is cooling he doesn’t want to make the mistake of waiting until inflation comes all the way down to 2%, because that level will probably drive inflation below 2%. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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