The Week in Review: 6/3/2024
"Energy and persistence conquer all things." ~ Benjamin Franklin
Good Morning,
Markets concluded a strong month in May, but the tech rally took a step back last week following disappointing earnings from Salesforce. Most other sectors followed suit with only Real Estate, Utilities, and Energy sectors posting positive returns for the week.
Mega cap stocks had an outsized impact on index performance throughout the month, especially NVIDIA, which jumped 26.9% in May.
The equal-weighted S&P 500 gained 2.8% this month, versus a 4.8% gain in the market-cap weighted S&P 500. Last week, however, the index logged a 0.5% decline.
The S&P 500 and Nasdaq Composite posted five consecutive weeks of gains, making the month of May one of the best of 2024.
Market participants had a slate of earnings news to get through last week, including from retailers like Best Buy, Foot Locker, Kohl's, and Dollar General.
Dow component Salesforce was a losing standout following disappointing quarterly results, leading Salesforce to close 13.9% lower than the previous Friday.
Earnings, in aggregate are solid…
With 93.0% of S&P 500 companies reporting… 81.3% have beaten consensus estimates, up from 78.3% last quarter.
In other corporate news, ConocoPhillips will acquire Marathon Oil in an all-stock transaction.
The market also received a mixed batch of economic reports, highlighted by Friday's release of the April Personal Income and Spending report.
The key takeaway from the report is that the year-over-year PCE inflation rates did not worsen; however, they did not improve either. So, it seems unlikely that the Fed would find any new confidence in this report that inflation is moving sustainably toward its 2% target.
Treasuries settled mixed last week in response to the data and in response to some poorly received Treasury sales. Last week's $69 billion 2-yr note, $70 billion 5-yr note, and $44 billion 7-yr note sales met weak demand.
The 10-yr note yield rose five basis points last week to 4.51% and the 2-yr note yield declined six basis points to 4.89%.
Market Snapshot…
- Oil Prices – Oil prices finished out their worst month of the year, ahead of an OPEC+ meeting. West Texas Intermediate crude was down 72 cents, or 1.18%, to $77.99 a barrel, while Brent crude futures were down 24 cents, or 0.29%, to $81.62 a barrel.
- Gold – Gold prices posted a fourth monthly rise on renewed hopes for U.S. interest rate cuts. Spot Gold traded down 0.7% to $2,325.67 per ounce. U.S. gold futures settled 0.9% lower to $2,346.40. Silver finished the week at $30.44.
- U.S. Dollar – The dollar slid after U.S. inflation met April expectations. The dollar index was down 0.1% at 104.62. Euro/US$ exchange rate is now 1.089.
- U.S. Treasury Rates – U.S. Treasury yields rose on Friday as investors considered the state of the economy after digesting the week’s economic data. The U.S. 10-year Treasury yield was up more than 4 basis points at 4.42%.
- Asian shares were up in overnight trading.
- European markets are trading higher.
- Domestic markets are trading in the green this morning.
This week…
This week will feature May’s jobs report on Friday. That and next week’s Consumer Price Index (CPI) report will be the last major economic readings before the Fed makes its next interest rate decision on June 12.
The overwhelming belief is that rates will be held steady at this meeting, but we will be watching for the new Summary of Economic Projections to see how the Fed believes the second half of the year will play out.
March’s report indicated that the Fed was anticipating three rate cuts this year. Recent comments by Fed members and economic reports allude to this being unlikely.
According to CME’s FedWatch tool, the futures market has lowered its expectations and now foresees two cuts this year—one in September and one in December. How inflation behaves over the next couple of months could determine the path for the remainder of the year.
Have a wonderful week!!
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