The U.S. equity market advanced for the third week in a row, with the benchmark S&P 500 index adding 1.6%. The Dow Jones Industrial Average was particularly strong, adding 2.8%, while the Nasdaq Composite and the Russell 2000 touched new record highs, finishing the week with respective gains of1.2% and 1.5%.
There were several notable corporate headlines this week, starting on Monday when the executive chairman and former CEO of Starbucks(SBUX), Howard Schultz, announced that he will be stepping down. In talking about his future plans, Mr. Schultz failed to rule out a run for the White House, prompting speculation that he'll challenge President Trump in 2020.
Elsewhere in the consumer discretionary space, Tesla (TSLA) shares spiked on Wednesday after CEO Elon Musk said it's "quite likely" that Tesla will hit its target for producing 5,000 Model 3 electric vehicles per week by the end of June. Retailers soared this week, sending theSPDR S&P Retail ETF (XRT) higher by 6.3%, following comments from Evercore ISI Research, which suggested that fears aboutAmazon's (AMZN) ever‐growing footprint may be overblown. Some short‐covering activity also likely helped push retail shares higher.
Meanwhile, in the tech space, Facebook (FB) came under scrutiny once again following news that the social media company has data‐sharing partnerships with at least four Chinese electronics companies, including one flagged as a national security threat by American intelligence officials. Separately, Apple (AAPL) shares dropped on Friday following reports that the company has asked its supply chain to prepare around 20% fewer components for iPhones debuting in the second half of 2018.
In Washington, Commerce Secretary Wilbur Ross said the U.S. has struck a deal to end crippling sanctions against Chinese telecom giant ZTE that includes a $1 billion penalty and the implementation of a U.S.‐chosen compliance team to monitor the company going forward. ZTE will also be required to change its board of directors and its executive team. On a related note, China is reportedly ready to approve Qualcomm's (QCOM) proposed acquisition of NXP Semi(NXPI).
Leaders from the Group of Seven (G7) kicked off their annual summit on Friday in the small Canadian resort town of La Malbaie. This year's meeting is expected to be more contentious than usual due to President Trump's decision to impose tariffs on imports of steel and aluminium. French President Emmanuel Macron has threatened to exclude the U.S. from the annual joint statement, symbolizing the strained relationship between the U.S. and its allies.
In Europe, the ECB's Chief Economist, Peter Praet, said the European Central Bank will discuss how to wind down its asset purchase program at next week's policy meeting after officials agreed that inflation is moving towards the central bank's target of 2.0%. The euro responded by rallying against the U.S. dollar, adding nearly 1.0% for the week.
The Fed will also be meeting next week, and it's all but certain that officials will hike interest rates for the second time this year. The question is whether the updated interest‐rate projections, which will be released alongside the rate‐hike decision on Wednesday, will call for one or two more hikes this year.