The U.S. stock market largely maintained its growth trajectory on Friday, driven by easing inflation and a mix of corporate earnings reports. The U.S. dollar, concurrently, lingered near its lowest levels in 15 months. The inflation data unveiled this week sparked investor confidence that the Federal Reserve might soon conclude its interest rate hike phase.
Date: July 15, 2023
Place: New Delhi, India
Wednesday’s report revealed the most sluggish growth in U.S. consumer prices in over two years. This was followed by Thursday’s data showing the smallest surge in producer inflation in nearly three years. On Friday, the government indicated a 0.2% decline in import prices last month, while consumer sentiment leaped to its highest level in approximately two years.
The MSCI World Equity index remained relatively stable on Friday, sustaining its annual peak and the highest level since early 2022. Despite a lukewarm response to mixed quarterly results from banks and financial companies, Wall Street stocks stayed steady. This was buoyed by an uplift in UnitedHealth Group and other health insurance stocks.
Specific indices showed a minor shift. The Dow Jones Industrial Average increased by 0.33% to reach 34,509, while the S&P 500 and Nasdaq Composite fell by 0.10% and 0.18%, settling at 4,505 and 14,113, respectively.
European indices mostly remained unaltered. The STOXX slipped by 0.11% and London’s FTSE 100 saw a minor decrease of 0.08%. The DAX in Germany declined by 0.2%, pulling back its recent gains.
Generali Investments’ Michele Morganti expressed concerns over the inflated price-to-earnings ratios compared to actual rates and economic growth, particularly in the U.S. He highlighted worries about persisting core inflation, tightening credit conditions, and negative macroeconomic indicators.
On the bond front, U.S. government bond yields marginally recovered on Friday after a sharp drop earlier in the week. The 10-year Treasury note yield rose 6.3 basis points to 3.822%, while the two-year Treasury yield surged 15 basis points to 4.761%.
With softer U.S. inflation numbers, Eurozone government bond yields remained steady. Even though a 25 bps hike is expected from the Fed on July 26, the chances of another hike later this year have been downgraded.
The dollar remained near a 15-month low following the subdued U.S. inflation data, while the euro steadied at $1.1223, after peaking at over a 16-month high.
Oil prices underwent a correction, dropping by over a dollar per barrel on Friday due to dollar strengthening and profit-booking by traders after a steady rally. U.S. crude fell 2% to $75.33 per barrel, while Brent stood at $79.75, down around 2% for the day.
Gold prices dropped by about 0.3% on Friday, but are set to have their largest weekly gain since April, given the indications of slowing U.S. inflation.
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