MCF Weekly Capital Market Review - July 29th, 2019
Mostly positive earnings reports buoyed markets the past two weeks. Most tech giants were positive, with beats from Microsoft, Alphabet, Facebook, and Twitter. Notable misses for the past two weeks included Amazon, Netflix, and Boeing. Heavy earnings releases continue for the next two weeks before tapering off. For the week, major US equities were positive although international equities were down.
A bill on the debt ceiling passed the Senate and now moves to the House and then President Trump, where it is expected to pass both. The bill strategically tables the debt ceiling issue, and chance of a government shutdown, through July 2021 - after the 2020 presidential election. In Europe, UK’s new Prime Minister Boris Johnson has taken an adamant stance to meet the Brexit deadline of October 31 this year with “No ifs, no buts,”; that is, with whatever deal (or lack thereof) is made. Until then, the financial and economic status between the UK and the EU remains in political purgatory.
Existing and new home sales are flattening out after a strong start to the year. Unemployment claims were on the low end, reflecting other data points that suggest strong labor markets. Durable goods exceeded upper-end consensus for a strong showing. Q2 real GDP came in at 2.1%, below the 3.1% figure from last quarter, but higher than the 1.9% consensus estimate. Market participants respond to surprises by comparing estimated pre-release figures with actual post-release figures, so a better-than-expected GDP also provided a positive backdrop for financial markets. Furthermore, the GDP report showed strength with both real consumer spending and the core price index surpassing upper-end consensus.
This week will see the long-awaited FOMC meeting and decision on interest rate policy. As of Monday morning, market odds are betting on a 76.5% chance of 25 basis point cut and a 23.5% chance of a 50 basis point cut. It is an interesting reminder that in December 2018, the Fed dot plot was forecasting two rate hikes for 2019. There are also a plethora of economic indicators coming out, including consumer confidence, personal income, manufacturing indices, and employment situation, to name a few.
 CME FedWatch Tool
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