July 2023 Market Review

Stocks closed higher in July, with each sector posting notable gains. The stock market, and economy in general, have proven to be resilient in 2023, despite rising interest rates. The S&P 500 and the Nasdaq have enjoyed five straight months of gains, closing out their best seven-month stretch to start the year since 1997.

Bond prices fell lower in July, with yields increasing over the previous month. Ten-year Treasury yields rose 14.0 basis points from June. The 2-year Treasury yield ended July at 4.85%, down 7.0 basis points from a month earlier.

Crude oil prices climbed in July for the second month after falling for much of the year. A cutback in crude oil production has driven prices higher this summer.

The Federal Reserve, in its endeavor to bring inflation down to its 2.0% target, raised interest rates another 25 basis points in July, to the highest level in 22 years. There are signs that inflation is receding, however. The Consumer Price Index saw its 12-month rates fall to the lowest levels in nearly two years. Import and export prices dipped lower in July, as did producer prices.

Consumer spending, the bellwether of economic growth, continued to increase, although not quite at the pace set earlier in the year. The same can be said for gross domestic product, which accelerated in the second quarter and has continued to advance since the second quarter of 2022.

Employment continues to remain strong, with 209,000 jobs added in June, and the unemployment rate sat at 3.6%. Wages continued to rise, increasing nearly 4.5% over the last 12 months. Unemployment claims are up from a year ago but remain well under the ballooning figures seen during the height of the COVID pandemic.

While many economic indicators showed strength last month, several sectors retreated. The housing market has retreated, primarily due to lack of inventory and advancing mortgage rates. Sales of new and existing homes floundered, although home prices remained strong.

Eye on the Month Ahead

Investors will focus on corporate earnings and the labor market in August. The Federal Open Market Committee does not meet in August, so there will be no change to the Federal Funds target rate. Manufacturing, which has slowed during the summer months, looks to pick up steam in August.

Source: Broadridge