Today wasn’t just a great day for the Dow! Our kids, Gage and JJ, officially graduated from fifth grade and kindergarten and we are so proud of them. We are treating the family to a happy, fun-filled weekend and hope you all find health and relaxation as the month of June starts. As promised, here are some pictures:
And now onto the weekly recap:
The stock market had a strong showing overall on this holiday-shortened week. The S&P 500, which flirted with 4,100 last week, approached 4,300 during Friday's trade, reaching 4,290 at its high of the day. Uncertainty about the debt ceiling, which had loomed over the market for weeks, finally eased after a deal was passed by both chambers of Congress. The bill now heads to President Biden for signing.
This week brought some Fed commentary that had market participants rethinking Fed policy. Early Wednesday, the CME FedWatch Tool showed a 70% probability of another 25-basis points rate hike at the June meeting in response to Cleveland Fed President Mester (not an FOMC voter) telling FT that she sees no compelling reason to pause the rate hikes in June.
Later that day, Fed Governor Jefferson (FOMC voter), who is also the nominee for Vice Chair, said he thinks that "...skipping a rate hike at the coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming" and Philadelphia Fed President Harker (2023 FOMC voter) said he thinks the Fed can "take a bit of a skip for a meeting."
In response, the probability of a 25-basis points rate hike at the June meeting plunged to 25.6%, according to the CME FedWatch Tool. Still, Fed officials continue to signal that more rate hikes may be needed.
Market participants also received a slate of labor and inflation data that helped to keep recession and rate hikes concerns at bay for the time being. The May ISM Manufacturing Index featured a drop in new orders but also a pleasant-looking deceleration in the Prices Paid Index.
The May Employment Situation Report featured a 339,000 increase in nonfarm payrolls, a moderation in year-over-year average hourly earnings growth to 4.3% from 4.4%, and a bump in the unemployment rate to 3.7% from 3.4%.
Also, weekly initial jobless claims and the April JOLTS - Job Openings Report reflected continued strength in the labor market.
Mega cap stocks had been driving a lot of the action this year, but this week saw money rotate into areas of the market that had been trailing. The Invesco S&P 500 Equal Weight ETF (RSP) rose 1.9% this week versus a 2.0% in the Vanguard Mega Cap Growth ETF (MGK).
There was also some mixed earnings news this week from retailers. Most notably, lululemon (LULU), Advance Auto (AAP), Dollar General (DG), and Macy's (M) all made outsized moves after their earnings reports.
The S&P 500 consumer discretionary (+3.3%) and real estate (+3.1%) sectors saw the biggest gains this week. Meanwhile, the utilities (+0.8%) and consumer staples (+0.3%) sectors closed with the slimmest gains.
Treasuries ended the week with gains. The 2-yr note yield fell five basis points to 4.51% and the 10-yr note yield fell 11 basis points to 3.69%.
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.