Markets made significant moves this week with the release of important economic data. Advanced gross domestic product (GDP) figures for the second quarter and the Core PCE Price index monthly update were of particular interest to investors.
On Thursday, it was revealed that the economy grew by an estimated 2.8 percent during the previous three months. This was well above the expected 2 percent growth and was nearly double that revised figure of 1.4 percent from the first quarter. At first, the news was seen as unsettling to those who were hoping for a rate cut in September.
However, after the market was able to digest the information, the odds for a September cut rebounded. The market now expects a rate cut of at least 25 basis points in September, with another in December.
This is largely because data has shown a slowdown in hiring, a slowdown in spending and an increase of the unemployment rate. According to many analysts, housing and gas prices are the largest hurdles to getting inflation to tick back to 2 percent.
On Friday, the Core Price Index showed a .2 percent increase on a monthly basis. This was exactly what analysts expected prior to the release. It was also revealed on Friday that personal income went up by .2 percent on a monthly basis while personal spending increased by .3 percent. While the spending figure came in as expected, personal income was expected to increase by .4 percent.
In other news this week, it was announced on Wednesday that the Flash Manufacturing PMI came in at 49.5 while the Flash Services PMI came in at 56. On Thursday it was reported that durable goods orders dropped 6.6 percent on a monthly basis. Meanwhile core durable goods orders were up .5 percent. Durable goods orders were expected to increase by .3 percent while core durable goods orders were expected to go up by .2 percent.
In addition, it was revealed on Thursday that there were 235,000 unemployment benefit claims in the past seven days. The number was slightly below a projected 237,000 claims and was also lower than last week’s figure of 245,000.
The Dow finished the week up 170 points to close at 40,589. The weekly gain was largely attributable to a strong close on Friday that saw the market gain 654 points, which was a 1.64 percent increase on the day. On Wednesday, the market made its weekly low of 39,899 and made a weekly high of 40,744 on Friday afternoon. For the week, the index would gain 1.64 percent.
The Nasdaq would lose 590 points this week to close at 17,357, and this was the second straight week that the tech index would suffer a significant loss. The high of the week took place on Tuesday when the market hit 18,099 and would make its weekly low of 17,070 on Thursday. For the week, the index would lose 2.08 percent.
The S&P 500 lost 80.94 points this week to close at 5,459. As with the other two indexes, the S&P had a strong Friday to somewhat mitigate the damage for investors over the week. The market made its high of the week of 5,580 on Tuesday and would make its low of the week of 5,399 on Thursday. For the week, the index would lose 0.83 percent.
In international news, the Bank of Canada announced on Wednesday that it would be lowering the country’s prime interest rate to 4.5 percent from 4.75 percent. Japan also announced this week that its inflation rate was 2.1 percent on an annualized basis.
There will be a number of news announcements coming out next week, which includes the July nonfarm payroll figure. The FOMC will also be meeting next week to make its latest interest rate decision. Although there have been some calling for a rate cut now, it’s unlikely that rates change before September. The Bank of Japan (BOJ) and the Bank of England (BOE) will also be making interest rate decisions for their respective countries.