2023 | July 17

The Market

Stocks Bounce Back

The major U.S. stock indexes climbed around 2% to 3%, regaining ground they had lost the previous week and then some, with the S&P 500 and the NASDAQ reaching their highest levels in 15 months. The NASDAQ’s gain of more than 3% was its best weekly result in four months. 

A midweek report on U.S. inflation gave the stock market plenty of lift, as the government’s Consumer Price Index fell to an annual rate of 3.0% in June, the lowest level since March 2021. The rate has steadily dropped since peaking at a four-decade high of 9.1% in June 2022. A separate report on Thursday showed easing inflationary pressures at the wholesale level as well.

The latest inflation data eased concerns about the pace of further interest-rate increases, and the previous week’s sharp rise in government bond yields reversed course. The yield of the 10-year U.S. Treasury bond dropped from 4.05% at the close of last week to 3.82% on Friday. The 2-year note’s yield fell from 4.94% to 4.73%.

Earnings season got into full swing on Friday as three major U.S. banks reported second-quarter results, and each one exceeded analysts’ expectations for net income and revenue. However, as of Friday, analysts were forecasting that earnings for all companies in the S&P 500 fell by an average of 7.1% overall, according to FactSet.

An indicator that tracks U.S. consumer sentiment rose to its highest level since September 2021. Friday’s preliminary reading from the University of Michigan’s Consumer Sentiment Index rose to a level that was well above most economists’ expectations and reflected a 13% increase from the previous month’s reading. 

Oil prices climbed for the third week in a row, as the price of U.S. crude reached as high as $77 per barrel on Friday morning before settling around $75. The price was up from a recent low of around $68 on June 27.

An index that tracks investors’ expectations of short-term U.S. stock market volatility fell about 10% for the week. After climbing the previous week, the CBOE Volatility Index (VIX) retreated to a level that was slightly above the multi-year low that it reached on June 22.

A report on U.S. retail sales scheduled to be released on Tuesday will indicate whether the positive momentum from April and May extended into June. Despite inflationary pressures, month-over-month retail sales rose 0.3% in May following a 0.4% rise in April. As recently as March, retail sales had been trending in a negative direction.

Source: John Hancock Investment Management

Inflation From A Year Ago

New Frontiers in Fungus

Anyone who has watched The Last of Us, a series that features a fungus mutation that turns humans into zombies, may be interested to learn that scientists and engineers have been exploring and developing new ways to harness the power of fungi and bacteria. Here are some of the ideas they’re working on:

• Knitted biostructures. Scientists, engineers and designers have been collaborating to develop bio-fabricated architecture – buildings made from the roots of fungus combined with wool, sawdust and other natural materials. The stumbling block was that fungus roots, a.k.a. mycelium, need a lot of oxygen to grow. The solution was textile knitting that allows a lot of oxygen into the frame, helping mycelium grow more quickly. The research team created a “prototype structure… a nearly six-foot-tall, freestanding three-dimensional dome constructed as a single piece without any joins,” reported Andrew Paul of Popular Science.

• Mushroom-skin computer chips. Researchers think a biodegradable microchip composed of mushroom skin is a possibility. If they’re right, the development could “reduce electronic waste and cut greenhouse gas emissions from plastic,” reported Alan Truly of Digital Trends. Mushroom skin has also been used to print circuit boards. Fungi could play additional roles in the computers of the future.

• SCOBY technology platforms. If you make kombucha, you may be familiar with SCOBY (a.k.a. Symbiotic Culture of Bacteria and Yeast). While it’s often called a mushroom, it’s not actually a fungus. It’s a cellulose mat that may be used as a kombucha starter. It is also being used as “a malleable surface on which to print simple circuit boards,” explained Andrew Paul of Popular Science. Augmented kombucha surfaces are nonconductive and may prove to be just right for wearable technology because the surfaces are cheaper, lighter, and more flexible than traditional plastic options.

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