Wall Street ended the holiday-shortened week higher, with technology stocks leading the way. The Dow Jones Industrial Average was up less than 1% for the week. The S&P 500 and Nasdaq, which closed at record highs on Friday, were also 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’s technology sector was the biggest winner last week, with Apple and Broadcom the club’s best stocks. Consumer discretionary and communications services, which includes Meta Platforms and Alphabet, were also strong. The energy sector led the decline this week, followed by healthcare and industrials. Looking back at the week, which closed early on Wednesday and Thursday, we got some notable updates on the economy and heard from the club that holds Constellation Brands. Quarterly results from beer companies Corona and Modelo were decent on Wednesday, with the stock initially rising on the news. Members told us we were taking some profits on Constellation shortly before the open. However, the struggling wine and spirits business remains an issue that management will have to address in the coming quarters. Shares finished Wednesday down more than 3%, though they recovered much of that on Friday for a relatively flat week. Friday’s high was largely helped by a drop in bond yields — which was fueled by a June unemployment rate rise to 4.1% and a slightly higher-than-expected 206,000 nonfarm payrolls addition. Wage inflation was broadly in line with expectations. As a whole, the government’s monthly jobs report card supported the Federal Reserve’s case for a rate cut at its September meeting. While market expectations favor a second cut in December, the Fed expected only one rate cut this year after its June meeting. Last week also brought updates on the manufacturing sector. On Monday, the ISM manufacturing PMI for June came in weaker than expected and pointed to a faster-than-expected contraction, and on Wednesday, factory orders for May showed a monthly decline versus expectations for a slight increase. The ISM services PMI for June, released on Wednesday, also disappointed, showing a contraction in the services sector. Economists had expected to see an expansion. These readings were also a green light for the Federal Reserve to start cutting interest rates. Hopefully everyone had a good Fourth of July and had a quiet weekend. You’ll want to take advantage of the calm because believe it or not, earnings season is back. Three of the four major central banks will report on Friday, including Wells Fargo. The government will also provide key data on consumer and wholesale 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 CPI carries more weight because it more closely represents what consumers pay for a basket of goods from year to year or month to month, which is the Fed’s primary concern. Still, the PPI is important to follow because it tells us what’s happening at the input cost level for businesses. This speaks to margin dynamics — and therefore, can tell us about profitability and potential price actions companies may need to take in the future to protect profitability. Within the CPI data, be sure to keep an eye on the shelter component, which has been a big thorn in the side of the Fed. Shelter, a measure of what people pay for housing, has proven to be a highly sticky source of inflation — a problem because for most Americans it represents a large, unavoidable cost. For the headline CPI, economists are forecasting a 3.1% annual increase, according to FactSet as of Friday. The core CPI, which excludes food and energy prices, is expected to rise 3.5% on a year-over-year basis. If that happens, that would represent a slight slowdown on the headline level but a slight acceleration on the core level. As for the producer price index, economists are looking for a 2.3% annual increase on the headline level and a 2.5% annual increase on the core level. Those numbers would be slightly higher than we saw in May. Earnings Season: Within the portfolio, net interest income (NII) guidance will be a key watch when Wells Fargo reports its quarter next Friday. At an industry conference Tuesday, CFO Michael Santomassimo reiterated guidance for net interest income to decline 7% to 9% year over year. We still think that outlook may be conservative because a longer-term higher Fed policy is generally a tailwind for net interest income. However, other factors such as muted loan demand have kept Wells Fargo from raising its outlook this year. Given the recent strong gains in shares of Wells Fargo and fellow club bank Morgan Stanley, we took some profits last Friday. Morgan Stanley is scheduled to report earnings on Tuesday, July 16. We’re also interested in hearing management’s thoughts on the intended pace of share buybacks in the second half of the year, now that the stress test results are in. Wells Fargo — and our fellow club bank Morgan Stanley — both passed the test, suggesting they have strong capital positions with excess cash to return to shareholders. Other top-level items in the Wells Fargo report include commentary on the state of consumer savings, an indicator of more purchasing power, and the housing market, something we’ve been watching as the world finds a new normal post-COVID. Monday, July 8 No major events Tuesday, July 9 No major events Wednesday, July 10 No major events Thursday, July 11 8:30 a.m. ET: Consumer Price Index 8:30 a.m. ET: Initial Jobless Claims Before the Earnings Bell: PepsiCo (PEP), Delta Air Lines (DAL), Conagra Brands (CAG) Friday, July 12 8:30 a.m. ET: Producer Price Index Before the Earnings Bell: Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) (See here for a full list of stocks in Jim Cramer’s Charitable Trust.) As a subscriber to CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after a trade alert is sent before executing the trade. The above Investment Club information is subject to our Terms and Conditions and Privacy Policy, as well as our Disclaimer. No fiduciary obligation or duty is, and is not, created by your receipt of any information provided in connection with the Investment Club. No specific outcome or profit is guaranteed.
The American flag is shown hanging on the New York Stock Exchange building on Independence Day in New York, USA on July 4, 2024.
Beata Sauerzel | Norfoto | Getty Images
Wall Street ended the holiday-shortened week higher, with technology stocks leading the way.
