S&P 500 Makes Another Record High As Morale Remains Up

Risk assets got a boost today from the second part of the Chinese stimulus, and S&P 500 made a new record high. Commodities and commodity currencies also got a boost, however, the stimulus measures are not totally clear. European stock markets also closed with solid gains.

China had one major tool left in its arsenal, and it needed to be deployed this week. The Monetary Policy response included several notable actions: rate cuts, reserve ratio adjustments, real estate buyback funding, and relaxed borrowing rules. Despite these efforts, the market quickly shifted its focus toward the anticipated fiscal stimulus, the second part of China’s strategy to revive its economy.

US S&P 500 Chart Daily –

The announcement from Chinese authorities was delayed, causing risk assets like oil and commodity currencies to fall against the USD yesterday. Today, though, the situation changed as China finally delivered the second phase of its plan. They announced that spending would be allocated to meet their 5% growth target for the year, though specific details about the fiscal support package were not fully disclosed. That helped push the S&P 500 index to another record high.

US Q2 GDP Final Revisions

• US Q2 final GDP: +3.0% (in line with expectations, prelim reading also +3.0%)
• Final Q1 GDP: +1.4% (unrevised)

Details:

• Consumer spending: +2.8% (vs +2.9% second reading)
• GDP final sales: +1.9% (vs +2.2% second reading)
• GDP deflator: +2.5% (unchanged from second reading)
• Core PCE: +2.8% (unchanged from second reading)
• Corporate profits after tax: +3.5% (vs +1.7% second reading)
• Business investment: +3.9% (same as second reading)

Contributors to 3.0% GDP Growth:

• Consumption: +1.90% (vs +1.57% second reading; Q1 +0.98%)
• Government spending: +0.52% (vs +0.53% second reading; Q1 +0.31%)
• Inventories: +1.05% (vs +0.82% second reading; Q1 -0.42%)

Subtractor:

• Net international trade: -0.90% (vs -0.72% second reading; Q1 -0.65%)

The GDP figures for Q2 show stable growth, with corporate profits rising more than initially expected and consumption contributing significantly. Net international trade remains a drag, but inventory growth helped offset the negative trade balance.

S&P 500 Live Chart