Happy Summer vacation to all the kids and parents and caretakers out there! JJ finished up his kindergarten school work last week and Gage finished up his 5th grade work yesterday. Both received Straight A's this semester. This week they will both have graduation ceremonies to mark their "promotions", so be on the lookout for photos of two very cute kids.
This weekend is also Memorial Day weekend. It's a special one in our family, as it marks the occasion of when Laura and I met. No matter what you're doing to celebrate this holiday, we hope you'll take a moment to remember all those who made the greatest sacrifice for our country.
And now onto the weekly recap:
The stock market finished out this week on an upbeat note ahead of the extended holiday weekend. The major indices saw some turbulent action, though, as market participants dealt with a lot of crosscurrents. The S&P 500 traded in a wide band between 4,100 and its closing level on Friday, which was just above 4,200. The latter is the highest level for the S&P 500 since last August.
Uncertainty about the debt ceiling kept the market in check earlier in the week as contrasting reports emerged about how much progress was being made. Concerns reached a peak when Fitch Ratings put the nation's AAA rating on Credit Watch Negative. By Friday, though, some angst around the debt ceiling seemed to ease due to reports that negotiators were making progress and that a deal could be near.
Lingering rate hike concerns were also in play as investors reacted to the following commentary from Fed officials:
Some economic data this week corroborated the view that more rate hikes may be needed. Briefly, Q1 GDP was revised up to 1.3% from 1.1%, weekly initial jobless claims came in lower than expected, and the Personal Income and Spending Report on Friday reflected strong consumer spending and an uptick in the year-over-year PCE and core-PCE Price Indices.
Following the release of the Personal Income and Spending Report, market participants dialed up expectations of a 25 basis points rate hike at the June FOMC meeting. According to the CME FedWatch Tool, there is a 65.4% probability of a 25 basis points rate hike in June, up from 17.4% last Friday and 13.7% a month ago.
Market participants were also digesting some market-moving corporate news. NVIDIA (NVDA) logged a huge gain following its stellar quarterly results and guidance. Marvell Technology (MRVL) was also a big winner after its earnings report. Those names helped drive the outperformance of the PHLX Semiconductor Index (SOX) this week, which jumped 10.7%. After this week's gain, the SOX is up 18.4% this month.
There was also a slate of earnings reports from retailers, which fueled some outsized moves to the upside and the downside.
In addition, mega caps continued their outperformance. The Vanguard Mega Cap Growth ETF (MGK) rose 2.2% this week versus a 0.3% gain in the market-cap weighted S&P 500. The Invesco S&P 500 Equal Weight ETF (RSP), meanwhile, fell 1.2%.
Treasury yields moved sharply higher this week. The 2-yr note yield rose 29 basis points as market participants recalibrated Fed policy outlook to 4.56%. The 10-yr note yield rose 11 basis points to 3.80%. The U.S. Dollar Index rose 1.0% to 104.23.
S&P 500 sector performance reflected leadership from mega cap stocks. The information technology (+5.1%), communication services (+1.2%), and consumer discretionary (+0.4%) sectors were the lone outperformers to close with a gain this week. Meanwhile, the consumer staples (-3.2%) and materials (-3.1%) sectors were the weakest performers.
As a reminder, markets are closed on Monday in observance of Memorial Day.
Below are truncated summaries of daily action:
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.