Market Recap - Little Changed Following Headline-Heavy Week

market recap

There was a steady stream of noteworthy news this week, but none of the headlines moved the S&P 500 in a significant way. The benchmark index ended the week almost exactly flat, adding less than one point. The tech‐heavy Nasdaq outperformed, adding 1.3%, while the Dow lagged, losing 0.9%.

This week's story really began over the weekend when the annual Group of Seven meeting, which was held in Quebec, ended on an uncharacteristically contentious note. President Trump was prepared to sign the customary joint statement, but changed his mind following what the White House deemed as "inappropriate" comments from Canadian Prime Minister Justin Trudeau.

The world then turned its attention to Singapore, where President Trump met with North Korean leader Kim Jong Un on Tuesday in a historic summit that marked the first ever meeting between a sitting U.S. president and a North Korean leader. The meeting ended with a joint statement in which North Korea reaffirmed its commitment to completely denuclearize and the U.S. promised "security guarantees" ‐‐ including the suspension of military exercises on the Korean Peninsula. The two nations will engage in follow‐up negations to work out the specific details.

Monetary policy took center stage midweek when the U.S. Federal Reserve released its latest policy directive. The Fed decided to raise interest rates for the second time this year, increasing the fed funds target range by a quarter point to 1.75% to 2.00%, and upped its interest‐rate forecast to include a total of four rate increases this year ‐‐ up from three in March. The market had expected the rate hike, but the updated forecast took some by surprise.

Overseas, the European Central Bank released its latest policy directive on Thursday. As expected, the ECB left its key policy rate unchanged and announced a plan to end its asset purchase program. The ECB in September will cut its monthly purchases in half, from EUR30 billion to EUR15 billion, and then end purchases altogether three months later ‐‐ although it will continue to reinvest the principal from maturing securities. As for interest rates, the ECB said they will remain at their present levels "at least through the summer of 2019." That statement was credited with sending the euro down more than 1.0% against the U.S. dollar.

The Bank of Japan also conducted a policy meeting this week but made no changes to its key interest rate. However, the BoJ did downgrade its view on inflation, further highlighting the difference between the BoJ, which is struggling to end its crisis‐era stimulus, and the Fed, which continues to progress on a path to normalization.

Back in the States, media names were in focus after a federal judge on Tuesday ruled in favor of AT&T (T) in its drawn‐out legal battle with the Justice Department. The ruling allowed AT&T to move forward with its acquisition of Time Warner (TWX), which it closed on Thursday, and set the stage for more merger activity in the future. Comcast(CMCSA), for instance, outdid Disney's (DIS) all‐stock bid for the bulk of 21st Century Fox's (FOXA) assets following the ruling, offering $65 billion in cash.

In politics, trade war fears were reignited on Friday after President Trump confirmed that he's approved a 25% tariff on $50 billion worth of Chinese goods. China responded swiftly, announcing that it'll impose a 25% tariff on $34 billion worth of U.S. goods on July 6, the same day the U.S. tariffs are scheduled to take effect.