Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.1%, the S&P 500 was down 0.3%, and the NASDAQ fell 0.7%. Foreign stocks (MSCI EAFE) were also down for the week falling 1.0%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.18%. (Data source: Wall Street Journal)
GDP Growth Beats Expectations
The final Q2 GDP number was released last week and came in at 3.8% beating the estimate of 3.3%. The beat was a welcome sign to investors as it eased worries of a recession after a negative reading in Q1. The negative Q1 print can be mostly attributed to the import spike as companies tried to beat tariff costs. A positive out of the report was that consumption, which drives 70% of economic growth, came in at 2.5% compared to the 1.7% estimate. Overall, the report showed strong economic conditions continue for the U.S. economy, and estimates show the trend continuing.
Labor Market & Inflation Will Dictate Possible Rate Cut
Markets are currently pricing in an 89% chance of another rate cut next month, but not everyone seems sold the Fed will cut again. With a strong GDP report and jobless claims falling recently, Fed Chair Powell may not believe a cut is necessary. What will dictate the decision is the next month’s reports on inflation and unemployment. Markets could experience some choppiness between a possible rate cut and a possible government shutdown looming around the corner.
Electronic Arts (EA) to go Private for $50 Billion
EA, a video game creator, rose 15% on Friday on reports from the WSJ that it will be going private for $50 billion, with the main investors being Saudi Arabia’s Public Investment Fund and Silver Lake. This has the potential to be the largest leveraged buyout deal we have ever seen, as the previous record was $45 billion. EA has not commented on the deal, but it is expected to be announced this week or next. (CNBC)
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Quiz
How much has the S&P 500 rallied from its April lows? (Scroll Down for Answer)
- 33%
- 25%
- 18%
- 12%
Answer:
- 33%. The S&P 500 has ripped higher since its April lows as tariff and recession fears have taken a back seat and earnings remain strong.
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