Stock traders were encouraged by the most recent inflation data, raising expectations of an interest rate cut in September. The major benchmark stock indexes closed the week in the black, led by the Russell 2000. The small-cap index recorded its best weekly performance since October 2023, while reaching its highest level since January 2022. The expectation of falling interest rates and economic strengthening likely prompted the market shift to more interest-sensitive small- and mid-cap stocks. The Dow rose above 40,000 at one point on Friday, ultimately closing at 40,000. The S&P 500 climbed above 5,600. Crude oil prices slipped lower. While prices at the pump may have risen nationally last week, as of July 1, weekly U.S. average gasoline prices actually declined $0.19 per gallon since the 2024 high on April 22, falling to $3.48/gallon on July 1, $0.05 per gallon less than the price a year ago. Increasing gasoline inventories, relatively weak demand, and oil prices below recent peaks contributed to falling gasoline prices.
Last Week’s Economic News
- In what is most likely good news for traders looking for the Fed to lower interest rates, the June Consumer Price Index declined slightly. This is the first time since May 2020 that the CPI registered less than 0% for a month. Prices rose 3.0% over the last 12 months, a smaller increase than the 3.3% advance for the 12 months ended May.
- Prices at the producer level advanced some in June after being unchanged in the previous month. Producer prices rose 2.6% for the 12 months ended in June, the largest advance since March 2023.
- The Treasury budget deficit for June was $66.0 billion, well below the May deficit of $348.0 billion. For the current fiscal year, the total deficit is $1,268.3 trillion. The deficit over the same period in the last fiscal year was $1,393.0 trillion.
- The national average retail price for regular gasoline was $3.489 per gallon on July 8.
- For the week ended July 6, there were 222,000 new claims for unemployment insurance, a decrease of 17,000 from the previous week’s level.
Eye on the Week Ahead
The retail sales report for June is available this week. Sales of goods and services to consumers ticked up 0.1% in May and 2.3% over the past 12 months. Another important report to consider this week is the Federal Reserve’s index of industrial production for June. Industrial production and manufacturing rose 0.9% in May. Overall, industrial production is up 0.4% from May 2023, while manufacturing is up 0.1%.
Have a nice week!
Sincerely,
Robert G. Carpenter