With financial markets pondering recent geopolitical developments and sector rotation out of tech weighing on markets last week, now is the perfect time to reach out and keep you informed.

Tallying the week, the S&P 500 declined by 0.83%, the Nasdaq 100 fell by 2.56%, and the Dow Jones Industrial Average rose, ending the week higher by 0.75%, as sector rotation was once again on display.

U.S Stocks / Sector Rotation

Stocks traded lower overall in a rather choppy fashion last week, with selling in large-cap tech keeping a lid on the Nasdaq and S&P 500.

The shift into industrials, small-caps, and value versus tech and growth unfolded for a third consecutive week.

Notably, small-caps and the Russell 2000 have been in the conversation, with the 2000-company small market capitalization stock index making gains last week.

Israel Strike

Saturday afternoon, news broke that Hezbollah attacked Israel. Now, Israel is preparing its response, but many senior officials have mentioned that an all-out war is to be avoided.

The story is developing, and market participants are bracing for Israel’s response.

GDP Solid

As last week developed, investors looked to Thursday’s gross domestic product (GDP) data for confidence in the state of the U.S. economy, and the data was indeed supportive. Data showed that the U.S. economy grew by 2.8% in the second quarter, and economists predicted a growth rate of 2.1%.

The higher-than-expected GDP data was supportive for markets and strengthened the case of futures traders when it comes to rate cuts in September.

“GDP exceeded expectations in the second quarter, restoring faith that the economy is easing into a sustainable level of growth,” America’s Credit Unions Deputy Chief Economist Curt Long said in a statement.”Recent statements from Federal Reserve officials confirm that a rate cut is squarely in view. However, such action is not needed to ward off a recession but is rather a response to the moderation in inflation.”

Fear Index Rises

As major stock indexes traded in a mostly choppy fashion last week, the so-called “fear index” rose to levels not seen since April, as tech led the equity markets lower.

Given the backdrop featuring geopolitical factors and some anxiety over earnings, it only makes sense to see a higher level of volatility.

Busy Week – Fed & Earnings

It’s an action-packed week for the markets, with big tech earnings front and center.

On Tuesday, we get Microsoft earnings, Meta on Wednesday, and Apple and Amazon on Thursday. In addition, we get the July Federal Reserve (Fed) meeting on Wednesday, where expectations remain that rates will stay unchanged.

Interestingly, however, there is a remote chance of a rate cut this week, according to the CME FedWatch Tool on Monday morning. Data showed a 4.1% chance of a rate cut and a 95.9% chance of rates remaining unchanged at this week’s Fed meeting. These probabilities fluctuate throughout each day.

Reflecting and Looking Ahead

As markets look for lower interest rates via the Fed in the not-too-distant future, the focus is on corporate earnings with the tech heavyweights on deck. The fresh possibility of Middle East escalation is on the minds of many as this action-packed Fed week begins.

This week brings us plenty of catalysts: Big tech earnings, other earnings, the Fed meeting, and the big monthly jobs number to end the week. All the while, markets will continue to digest the most recent tamer inflation data and the Middle East concerns.

Thank you for reaching this week’s financial market update!

Sincerely,

The Trademark Capital® Team

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