Thrilled I finally get to say this: that was the end of the week (and month) we were hoping for –the best month in fact since November 2020. After Apple and Amazon last night with positive numbers, there was only one way for markets to go. While it’s still a bit too early to call the rotation as of late a full trend, a break through of the June highs for indices would put us on high alert (June high for the S&P was 4177.51 vs today’s close of 4130.37). Our charts team is also flagging that MedTech names in the US are picking up, while Financials names are deteriorating. The tidal wave of economic data continued this morning – we had the Fed’s preferred inflation gauge, PCE Deflator, which like the rest of inflation data, came in ever so slightly elevated. The latest University of Michigan Sentiment/Current conditions also hit this morning, and with Sentiment and Current Conditions higher than expected, the market had a green light to keep climbing. It did just that, with the index rising throughout the afternoon. Tech and discretionary names led, both after numbers last night and on slightly better consumer data. This wasn’t a hard and fast rule however, as Intel (INTC, -8.56%) slashed forecasts for the year, and was harshly punished.

When multiple clients tell you this morning they thought it was Friday, you know it’s been a week! Talk about a rude awakening for those with their calendars mixed up. But they can be forgiven for such a mishap, the flurry of activity melding the week’s days into one and we’re not even finished. On the bright side, we’re not in a recession at least. I’m sorry, what now? But Jerome said…in the traditional sense, the -0.9% fits the definition but Powell rejected that notion yesterday. That’s that then. But you could make the argument he’s right, with a number of bellwether companies suggesting in fact we aren’t in the throes of a classic recession. Although don’t tell that to Treasuries, all points along the curve sinking but the early bit more than the back end. Reconciling what’s happening in the bond market (and you know, GDP!) with the fact corporate earnings have remained steadfast has presented another conundrum for equity investors. Now about halfway through the reporting period and profit beats have come in at a historically familiar level i.e. been pretty good.

This week has been busy from every angle for investors, but one of the main expected events was the FOMC. In their battle against inflation, the amount of basis points they were going to hike today has been a daily conversation. Ahead of their quiet period, 75bps seemed the likely outcome (Bostic, Daly and Bullard were in agreement). Without a WSJ article suggesting a change in tactic this week, the Fed raised rates by 75bps, surprising no one. Like the Fed, markets have been monitoring economic data and its recent deterioration, and have rallied this month in anticipation of future rate cuts in 2023 by Powell. This has led Growth to outperform Value by 210bps as of yesterday’s close, and that lead accelerated today to close at 490bps.

Less than 24 hours until the Fed decision, and while investors are waiting with baited breath, the day was far from quiet. With earnings season in full swing, there were a number of results to contend with pre market – Coca-Cola (KO, +1.35%) beat on sales and profits and McDonald’s (MCD, +2.62%) also beat, bringing some optimism to the consumer sector. However, last night Walmart (WMT, -7.63%) pre-announced negatively, as a stark reminder about the inventory issues many still face. GM (GM, -3.4%) beat on revenue and maintained its guidance, but missed on profit estimates – another chip shortage story at play. Energy also remained a key focus, with crude higher on news that Gazprom would cut capacity on the Nord Stream 1 to 20% from Wednesday.

Just when it looked like growth was about to take back the crown, jitters going into big tech earnings this week SNAPped growth’s recent outperformance (see what I did there?). The SGX underperformed SVX by over 1.3% today as a volatile start the week gave investors pause, leaving the S&P slightly higher +13bps and the Nasdaq down -43bps. The weakness was led by Tech and Consumer Discretionary names, with many due to report in the next few days.

Not the end to the week many were hoping for, but things could be worse. Yesterday afternoon may have given some indication things wouldn’t be pretty, with Snapchat (SNAP, -40%) post market reporting crushed sales as advertising spend slumped. Tech’s performance lately has really helped the markets stage the rally, but as negative earnings hit, further outperformance is called into question.

Today was not quiet – the long awaited ECB decision to hike rates for the first time in 11 years was by more than expected, Initial/Continuing Jobless claims were hotter than expected, and it was the busiest earnings day of the season so far. The last point helps explain some of the outperformers – Autos & Pharma/Biotech led today, with Tesla (TSLA, +9.8%) and Danaher (DHR, +9.2%) reporting better than expected numbers.

Everything was cruising along for the market again today until someone typed “what happens when we pause hiring” into their Google search engine. The stock came off highs thanks to that unconfirmed headline (though closed flat) and added to a growing list of companies potentially pausing hiring. Any recessionary signs are unhelpful in this environment and markets dropped, but ultimately held onto positive territory (4th up day out of 5 for the Nasdaq).

For the last few weeks, investors have been devouring every economic datapoint and comment from Fed speakers, in an effort to apply a probability to future Fed moves. But the calendar has shifted into the pre-meeting quiet period and participants can focus on earnings, at least for the next week. Concerns going into this earnings season were lingering supply chain tightness and inflation impacts, and companies ability to handle those.

The weather has been pretty delightful here on the east coast, but as one leaves work to grab lunch and feels as if their walking into a bowl of soup, it’s safe to say the dog days of summer have officially arrived. The UK apparently having more problems than most… Yes it’s hot outside – summer’s gonna summer. But the office provides a decent alternative if you’re unable to cool down at the beach and a traditionally slow time of year for markets has earnings season to maintain interest.