It may have been a holiday shortened trading week last week in the markets, but a few notable things happened. First, the yield on the 10-year Treasury moved back above 4% for the first time since the beginning of March. It wouldn’t take much for these yields to move back to last autumn’s highs (which was also when the stock market bottomed). If yields get above 4.27%, it will be the highest yield for the 10-year Treasury since 2007. This could become a headwind for the stock market. Another potential headwind, at least for the market leaders this year, is that ChatGPT traffic dropped 10% in traffic last month, it’s first month of declining growth. It wasn’t just ChatGPT, but other AI chatbots also saw declines last month according to Similarweb. AI is here to stay, of course, but might this declining growth impact the enthusiasm for AI stocks? This is all happening when individual investor sentiment, at least according to the weekly survey of individual investors from AAII, jumped up to its highest level of bullish sentiment since November 2021.
This week meanwhile, has some important numbers being released. First, on the economic calendar we have key inflation data on Wednesday and Thursday. While the headline inflation numbers should be the best they’ve been in some time, the core (ex-food and energy) numbers are expected to remain stubbornly high. In turn, the market still expects a 90% chance that the Federal Reserve will raise rates at their next meeting on July 26th. Next week also begins the 2Q23 earnings season in earnest, including some major financial names. While the current expectation is that we’ll see a third consecutive year-over-year negative reported earnings growth number, it is expected that operating earnings growth will turn positive. Now that’s a plus. Stock prices follow earnings.
If you have any questions or comments, please let me know: Rusty@Orion.com. Enjoy the week!
Stay invested. Stay diversified. Stay disciplined.