4 Economic Events That Could Impact Your Portfolio This Week, July 22-26, 2024

Markets sailed to new records in the first half of the week, but saw the rally come to a screeching halt on Wednesday. The rest of the week marked one of the biggest stock market declines this year. The S&P 500 (SPX) posted its worst week since April, falling nearly 2%, while the Nasdaq Composite (NDAQ) fell 3.7% and the major tech benchmark Nasdaq-100 (NDX) fell nearly 4%. In contrast, the Dow Jones Industrial Average (DJIA) closed the week in the green, up 0.7%, helped by a strong first-half rally on the back of the continued rotation into value stocks. The VIX Volatility index – the measure of market fear – rose to its highest levels since April.

Markets entered the historically weak July and August with optimism, but sentiment in the technology sector began to deteriorate earlier this month. Recent economic data, coupled with comments from Jerome Powell, have investors confident that the Fed will begin cutting rates in September. That outlook has accelerated efforts to shift technology stocks, widely seen as overvalued, into more cyclically oriented sectors expected to benefit most from the Federal Reserve’s rate cuts.

As investors grow increasingly nervous about technology, several developments have combined to trigger the fall in semiconductor stocks this week, starting with the weak sales outlook for the world’s top maker of high-end chip machines, ASML (ASML). Subsequent reports that the Biden administration was considering further curbs on chip equipment sales to China reverberated across the semiconductor industry.

The rotational imperative became even greater as the likelihood of Donald Trump’s election victory rose and markets began to embrace so-called “Trump trades,” including banks, defense and traditional energy stocks. Trump added to the tech sector’s woes on Wednesday by saying Taiwan should pay the U.S. to defend itself against potential Chinese hostility. Shares of the world’s largest chip foundry Taiwan Semiconductor Manufacturing (TSM) fell on the news. TSM makes about 90% of the most advanced semiconductors used in AI applications; its fate is crucial not just to chipmakers, but to the global economy.

Speculation about Joe Biden dropping out of the race has increased, leading to a sharp increase in the perception of political uncertainty and heightened investor fears. As the clouds gathered toward the end of the week, previous session winners—small caps, financials and healthcare stocks—also fell sharply.

Four economic events

Here are four economic events that could impact your portfolio this week. For a full list of additional economic events, check out the TipRanks Economic Calendar.

» S&P Global Manufacturing PMI for July And PMI Services (preliminary readings) – Wednesday 7/24 – The Manufacturing PMI captures business conditions in the manufacturing sector and is considered a leading indicator of business conditions and the overall economic climate in the U.S. The Services PMI captures business conditions in the services sector; it is a critical indicator as this sector accounts for over 70% of total U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to provide timely insight into changing economic conditions, as the direction and pace of change in the PMIs typically precede changes in the overall economy.

» Q2 2024 GDP growth year-on-year (advance estimate) – Thursday 7/25 – This report will provide an early look at a change in GDP from the previous quarter. Economists expect the pace of growth to have accelerated to 2% in the second quarter, up from the annualized rate of 1.4% in the first quarter. The increase is due to estimated growth in personal spending, which has picked up as inflation has cooled in recent months. A higher-than-forecast reading could lead to a slowdown in expectations for rate cuts by the Fed.

» June Core PCE Releases – Friday 7/26 – This report reflects the average amount consumers spend each month, excluding seasonally volatile items such as food and energy. FOMC policymakers use the annual Core PCE Price Index as their primary gauge of inflation. Core PCE inflation slowed year-over-year in May, with markets expecting the disinflationary trend of recent months to continue, supporting the likelihood of a rate cut in September.

» July Michigan Consumer Sentiment Index And UoM 5-year consumer inflation expectations (Preliminary Readings) – Friday, 7/26 – These reports provide the results of a monthly survey of consumer confidence and long-term inflation expectations in the United States. Confidence levels influence consumer spending, which accounts for about 70% of U.S. GDP. The inflation expectations index is used as part of the calculations of the Fed’s Index of Inflation Expectations.

For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.