July 18th, 2022

THE WEEK ON WALL STREET

A record-high inflation report, the prospects of a more aggressive Fed, and growing recession fears sent stocks lower– though a Friday rally pared losses.

The Dow Jones Industrial Average slipped 0.16%, while the Standard & Poor’s 500 lost 0.93%. The Nasdaq Composite index dropped 1.57% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.49%.1,2,3


STOCKS SLIDE

As the week opened, recession fears intensified with reports of renewed Covid-related lockdowns in China. Also, the U.S. dollar continued to climb, reflecting global economic weakness.  

June’s consumer price index report showed price increases accelerating. Year-over-year prices jumped 9.1%, the fastest pace in over 40 years. Speculation grew that the Federal Reserve might contemplate a 100 basis point increase in short-term rates later this month rather than the 75 basis point hike it earlier signaled. The market rebounded on Friday following a Federal Open Market Committee member saying he favored a 75 basis point hike. Also helping the Friday rally was a strong retail sales report and additional second-quarter company reports. 4


DOLLAR STRENGTH 

The increasing strength of the U.S. dollar moved to center stage last week as the dollar index (a measure of the U.S. dollar to six other major currencies) reached a fresh high, while the euro fell to parity with the dollar and to its lowest level since 2002. 5

A rising U.S dollar hurts overseas profits when converted into dollars and it also makes U.S. products and services more expensive. It’s a challenge for large, multinational companies that derive a portion of their earnings from overseas markets. Investors may gain greater insight into the extent of that impact as companies provide forward guidance with their upcoming reports. 

Tip of the Week

While scholarships are offered to students, no one offers a scholarship for retirement. Consider putting your own retirement before any college plans.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Housing Starts.

Wednesday: Existing Home Sales. 

Thursday: Jobless Claims. Index of Leading Economic Indicators. 

Friday: Purchasing Managers’ Index (PMI) Composite Flash.

Source: Econoday, July 15, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Bank of America (BAC), International Business Machines (IBM), The Goldman Sachs Group (GS), The Charles Schwab Corporation (SCHW).

Tuesday: Netflix, Inc. (NFLX), Johnson & Johnson (JNJ), J.B. Hunt Transport Services, Inc. (JBHT).

Wednesday: Tesla, Inc. (TSLA), Abbott Laboratories (ABT), CSX Corporation (CSX), United Airlines Holdings, Inc. (UAL).

Thursday: AT&T, Inc. (T), Snap, Inc. (SNAP), Blackstone, Inc. (BX), American Airlines Group, Inc. (AAL), Union Pacific Corporation (UNP), D.R. Horton, Inc. (DHI).

Friday: Verizon Communications, Inc. (VZ), Schlumberger Limited (SLB), American Express Company (AXP), NextEra Energy, Inc. (NEE), PPG Industries, Inc. (PPG).

Source: Zacks, July 15, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Quote of the Week

“When you come to the end of your rope, tie a knot and hang on.”

FRANKLIN DELANO ROOSEVELT

Riddle of the Week

You have 9 seemingly identical cubes before you. You are told that one is heavier than the other eight. Using a two-pan balance scale only twice, how can you pick out the heaviest cube?

LAST WEEK’S RIDDLE: Two in every corner, one in every room, none in a house. What is it?  

ANSWER: The letter “R.”

Valley Oak Wealth Management can be reached at 415.898.4439 info@valleyoakwm.com or ValleyOakWM.com

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Tim Russell is a Wealth Advisor with, and securities offered through, LPL Financial member FINRA/SIPC

This material does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.  Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

CITATIONS:

1. The Wall Street Journal, July 15, 2022 

2. The Wall Street Journal, July 15, 2022

3. The Wall Street Journal, July 15, 2022

4. The Wall Street Journal, July 13, 2022

5. CNBC, July 11, 2022