Weekly Market and Economy Roundup - 31 July 2023

In July, the US economy demonstrated a strong performance with a notable uptick in GDP and a robust rally in the financial markets. Tech giants reported strong earnings, while crude oil, gold, and copper surged significantly. However, export activity and housing sales hinted at potential challenges.

The US economy grew by 2.4% in Q2 2023. This was quicker than the 2.0% growth we saw in Q1. This surge can be attributed mainly to rising consumer expenditure and corporate investment. However, a decline in export activity partially counterbalanced these gains. Interestingly, imports, which negatively influence the GDP calculation, also fell this quarter.

The Dow closed higher for 13 straight sessions in July, its longest series of positive closes since 1987; Russel 2000, Nasdaq 100, Dow Jones, and S&P 500 closed with month with 6.06%, 3.81%, 3.35%, 3.11% gains, respectively.

All the Sectoral Indices ended the month with gains, with Energy, Communications Services, and Financials taking the top spot.

Microsoft reported stronger-than-expected Q4 earnings, surpassing estimates on several key metrics, including revenue of $56.19B. However, annual sales growth moderated to 7% in 2023, and cloud growth decelerated, causing some to question the hype around AI.

Alphabet delivered robust Q2 results, outperforming expectations with a revenue of $74.60B and an EPS of $1.44. All units, including Google Cloud, which reported another profitable quarter, surpassed estimates. Despite concerns about AI impacting search advertising, no such signs were apparent.

Meta's Q2 earnings surpassed expectations, with a 12% rise in ad revenue, supported by improved monetization of Reels.

Tesla's Q2 earnings revealed impressive performance, marking the fifteenth consecutive quarter of profit, with earnings beating both profit per share and revenue expectations. Successful cost reduction strategies, production ramp-ups, and strong performance in energy and services helped the company maintain a healthy operating margin.

For the first time since November 2021, Active Fund Manager Equity Exposure surged beyond 100%, showing an exceptionally robust sentiment.

Crude oil prices experienced a remarkable rally of more than 14% in July. During the same time, Gold and Copper surged over 4% each.

Inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 3% on a yearly basis in June from 4% in May, Core CPI inflation, which excludes volatile food and energy prices, dropped to 4.8% from 5.3%.

The US Federal Reserve hiked its benchmark interest rates to 5.25-5.5%, the highest since 2001, to counteract persistently high inflation. Fed Chair Jerome Powell hinted at further increases, supporting goals of maximum employment and 2% long-term inflation.

Conference Board's US consumer confidence index surged to 109.7, the highest level since the beginning of last year, driven by increased optimism about the labor market and economic growth, surpassing all economist estimates.

US weekly jobless claims dropped to 221,000, a decrease of 7,000 from the previous week's level of 228,000.

Sales of new single‐family houses in June 2023 were at a seasonally adjusted annual rate of 697,000. Privately‐owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,440,000. This is 3.7% below the revised May rate of 1,496,000 and 15.3% below the June 2022 rate of 1,701,000.

The median price of a home sold in the US stood at $416,100 in Q2, 2023, down over 13% from the all-time high of $479,500 in Q3, 2022.

July's economic activity displayed resilience and expansion, reflecting positive consumer sentiment and substantial corporate earnings. Despite declining home prices and concerns over AI's hype, the surging commodity prices, lower inflation rate, and booming equity markets indicate promising prospects for future growth.