This week there is plenty to celebrate! The Vegas Golden Knights completed their quest for the Stanley Cup on Tuesday, and we've been enjoying the party with our friends and family. But the celebration doesn't stop there.
Don't forget to RSVP to our First Annual Mid-Year Update later this month on June 27th. You should have received an invitation in your inbox last week. We are excited to host you and hope to see you all there!
And now onto the weekly recap:
This week, like last week, featured a bullish bias. The major indices all logged decent gains, which had the S&P 500 close above 4,400 for its fifth straight winning week. The Nasdaq for its part registered its eighth straight week of gains. Things got started on an upbeat note after Goldman Sachs raised its 2023 year-end S&P 500 price target to 4,500 from 4,000.
Mega caps were in a leadership role this week, which saw Apple (AAPL) and Microsoft (MSFT) each hit new all time highs. Small and mid caps stocks, meanwhile, trailed their larger peers after a big run recently. The Russell 2000 logged the slimmest gain among the major indices this week, up 0.5%, but shows the largest gain so far this month (+7.2%).
Semiconductor stocks were a pocket of strength in the market. The PHLX Semiconductor Index (SOX) rose 4.2% despite recording losses on Thursday and Friday.
This week's broad advance saw the Invesco S&P 500 Equal Weight ETF (RSP) rise 2.5%. Also, ten of the 11 S&P 500 sectors closed logged gains on the week. Energy (-0.7%) was the lone laggard in negative territory while the information technology (+4.4%), materials (+3.3%), and consumer discretionary (+3.2%) sectors saw the largest gains.
The rally really picked up steam with the release of the May Consumer Price Index (CPI) on Tuesday followed by the May Producer Price Index (PPI), FOMC decision, and Fed Chair Powell's press conference on Wednesday. The CPI and PPI reports went the market's way in terms of feeling better about the inflation trend.
In response to those reports, stock market action reflected a belief that the Fed may not over-tighten and precipitate a worse economic outcome than is necessary to get inflation back down to its 2.0% target. This was in spite of Fed Chair Powell's commentary that indicated more rate hikes may be needed.
The FOMC voted unanimously to keep the target range for the fed funds rate unchanged at 5.00-5.25%. The latest dot-plot showed an upward thrust in the median projection for the fed funds rate in 2023 to 5.60% from 5.10%. In other words, the median view calls for at least two more rate hikes in 2023. Also, the median policy rate projection for 2024 was revised to 4.60% from 4.30% and the median projection for 2025 was revised to 3.40% from 3.10%, which supports a "higher for longer" policy rate outlook.
Fed Chair Powell said in his press conference that the July meeting is a "live" meeting (for looking at a possible policy change), but one that isn't being pre-determined.
Regardless, the price action still reflected a growing belief that the Fed may be done, or close to done, raising rates. The sizable gains logged on Thursday likely triggered a flat squeeze as investors employed cash from the sidelines due to a fear of missing out on further gains.
Following the FOMC decision, the ECB announced a 25 basis points increase in its three key policy rates, as expected, while the Bank of Japan left its interest on excess reserves (-0.10%) and yield curve control unchanged. Also, the People's Bank of China announced a 10 basis points cut in the one-year medium-term lending facility rate to 2.65%. This followed China's weaker than expected retail sales, industrial production, and fixed asset investment data for May.
As a reminder, bond and equity markets are closed on Monday in observance of Juneteenth.
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.