John Hancock: Weekly Market Recap Week Ended July 19

Market rotation

For the second week in a row, a U.S. small-cap stock benchmark outperformed by a wide margin, posting a 1.7% total return while its large-cap counterpart fell 1.8%. The Russell 2000 Index’s surge of 7.7% over two weeks was the clearest indicator of a rotation toward market segments seen as being the biggest beneficiaries of potential interest-rate cuts.

Earnings gain

The second week of quarterly earnings season produced an uptick in expectations. Based on initial results and forecasts for upcoming reports, analysts on Friday were expecting S&P 500 companies to post an average second-quarter earnings increase of 9.7% compared with the same quarter a year earlier, according to FactSet. Just a week earlier, the projected growth rate was 9.1%.

Mixed signals

U.S. retail sales were unchanged in June relative to the previous month, beating the consensus forecast of economists, who had expected a sales decline of around 0.4%. However, another indicator came in worse than expected, as the latest weekly count of initial unemployment claims rose to 243,000. That figure was identical to the count from a weekly report last month, when the total was the highest since August 2023.

U.S. GDP ahead

Thursday’s scheduled release of the U.S. government’s initial estimate of second-quarter GDP is expected to show that the economy accelerated relative to the first quarter, when GDP grew at a 1.4% annual rate. An estimate released on Wednesday by U.S. Federal Reserve economists projected a second-quarter growth rate of 2.7%.