Market Recap - Some Good And Some Bad

The Week That Just Concluded Had Its Share Of Surprises. Some Were Good And Some Were Bad.

The good included the following:

• The 2-yr, 5-yr, and 7-yr Treasury note auctions

• Carnival's earnings report

• FedEx surging after its earnings report

• Amazon.com eclipsing a $2 trillion market capitalization

• All 31 large banks passing the Fed's annual stress test

• A Personal income and Spending report for May that hit the right soft landing notes, which included gains in personal income and personal spending to go along with a moderation in the PCE Price indexes

The bad included:

• A lack of broad-based participation. The equal-weighted S&P 500 declined 0.8% for the week.

• A massive 20% decline in Dow component Nike after it issued a greatly disappointing FY25 sales outlook.

• Reports of tension rising between Israel and Hezbollah.

• Micron losing nearly 8% after failing to live up to investors' high expectations with its guidance.

• Walgreens Boots Alliance missing earnings expectations, cutting its FY24 guidance, and announcing plans to close a significant number of underperforming stores

• Continuing jobless claims hitting their highest level since November 2021.

• New home sales sliding 11.3% month-over-month in May to a seasonally adjusted annual rate of 619,000 units.

The presidential debate, we suppose, could fit in either category depending on how one looked at things. We'll let others call that shot, but it's not a stretch to say that it injected a new level of uncertainty into the presidential election.

Market participants took the news as it came, but refrained from showing any strong conviction outside of individual stock moves. All in all, it was a mixed showing at the index level.

The market-cap weighted S&P 500 dipped 0.1% for the week, the Nasdaq Composite increased 0.2%, the S&P Midcap 400 dropped 0.1%, and the Russell 2000 gained 1.3%. The price-weighted Dow Jones Industrial Average was down fractionally for the week.

• Nasdaq Composite: +18.1% YTD

• S&P 500: +14.5% YTD

• S&P 400: +5.3% YTD

• Dow Jones Industrial Average: +3.8% YTD

• Russell 2000: +1.0% YTD

Market Recap - GAINS BROADEN OUT ON HOLIDAY-SHORTENED WEEK

The Major Indices Logged Gains On This Holiday Shortened Week. The S&P 500 Traded Past The 5,500 Level For The First Time After Reaching Record Highs On Light Volume Through Most Of The Week.

Bond and equity markets were closed Wednesday for Juneteenth. Friday's session featured heavy volume due to the quadruple witching options expiration.

Gains were relatively broad based this week. The equal-weighted 500 outperformed the market-cap weighted S&P 500, gaining 1.2% versus a 0.6% gain in the index. Only three of the S&P 500 sectors registered declines on the week.

The real estate (-0.3%), information technology (-0.7%), and utilities (-0.8%) sectors were alone in the red by the close. The consumer discretionary sector was the top performer this week, jumping 2.5%, followed by the energy (+1.9%), financials (+1.7%), and industrials (+1.9%).

Recent weeks have featured the outperformance of mega cap names, but this week features a broadening out of buying activity to other parts of the market. Some top-weighted names actually logged solid declines on the week, driven by a lingering sense for consolidation. NVIDIA (NVDA) is down 4.0% compared to last week and Apple (AAPL) fell 2.4% this week.

Treasury yields moved higher, but didn't deter buyers in the stock market. The 2-yr note yield settled up five basis points for the week at 4.73%. The 10-yr note yield settled up five basis points this week to 4.26%.

• S&P 500: +0.6% for the week / +14.6% YTD

• Nasdaq Composite: UNCH for the week / +17.8% YTD

• S&P Midcap 400: +1.3% for the week / +5.4% YTD

• Dow Jones Industrial Average: +1.5% for the week / +3.9% YTD

• Russell 2000: +0.8% for the week / -0.3% YTD

Market Recap - MEGA CAPS LEAD INDEX GAINS, BROADER MARKET TAKES A BREATHER

The S&P 500 And Nasdaq Composite Hit Fresh Record Highs This Week And Closed 1.6% And 3.2% Higher, Respectively.

Other major indices logged declines on the week, though. The Dow Jones Industrial Average declined 0.5% and the Russell 2000 fell 1.0%.

Gains in the mega cap space played an integral role in index-level gains for the S&P 500 and Nasdaq. The equal-weighted S&P 500 slid 0.5% this week.

Apple was an influential winner from the space, jumping 7.9% and hitting record highs after introducing "Apple Intelligence," the personal intelligence system for iPhone, iPad, and Mac, at its Worldwide Developers Conference. 

Broadcom, another top performing mega cap, surged 23.4% after a better-than-expected earnings report, outlook, and a 10-for-1 stock split announcement.

Another notable technology company -- Adobe (ADBE) -- delivered pleasing earnings results and guidance, gaining 12.9% this week.

These three names helped propel the S&P 500 information technology sector to a 6.4% gain. The next best performing sector was real estate, gaining 1.2%. On the flip side, the energy (-2.3%) and financial (-2.0%) sectors logged the biggest declines.

The underlying downside bias that left the equal-weighted S&P 500 lower on the week was driven by some normal consolidation efforts following a solid run in many stocks. Meanwhile, mega caps were reacting to the aforementioned corporate news, along with a solid drop in market rates.

The 10-yr note yield declined 22 basis points this week and the 2-yr note yield declined 20 basis points to 4.69%. This was in response to this week's slate of bond auctions, including a soft $58 billion 3-yr note sale, a strong $39 billion 10-yr note sale, and a solid $22 billion 30-yr bond reopening.

The activity in Treasuries was also in response to pleasing inflation data. The May Consumer Price Index reflected some welcome disinflation on a year-over-year basis in total CPI (actual +3.3%; prior +3.4%) and core CPI (actual +3.4%; prior +3.6%) and the May Producer Price Index showed a 0.2% month-over-month decline in total PPI while core PPI was unchanged from the prior month. 

The market was also reacting to the latest move by the Fed. The FOMC left the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. The vote was unanimous, as expected. The directive reiterated that, "The Committee does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably toward 2 percent," as expected.

If there was a surprise, it would be the Summary of Economic Projections (SEP), which showed a median estimate of only one rate cut this year versus three at the time of the March projections. Also, Fed Chair Powell's press conference featured a Fed Chair who was non-committal about the policy path.

Rate cut expectations moved up as a result of the aforementioned events. The fed funds futures market is pricing in a 70.2% probability of a 25 basis points rate cut at the September FOMC meeting, up from 50.5% one week ago, according to the CME FedWatch Tool. 

• S&P 500: +1.6% for the week / +13.9% YTD

• Nasdaq Composite: +3.2% for the week / +17.8% YTD

• S&P Midcap 400: -0.9% for the week / +4.1% YTD

• Dow Jones Industrial Average: -0.5% for the week / +2.4% YTD

• Russell 2000: -1.0% for the week / -1.0% YTD

Market Recap - MEGA CAPS LEAD S&P 500, NASDAQ TO FRESH ALL-TIME HIGHS

The Major Indices Logged Gains This Week Largely Thanks To Mega Cap Stocks Outperforming Their Smaller Peers.

Still, the broader market showed nice resilience to selling efforts. The equal-weighted S&P 500 declined 0.7%  versus a 1.3% gain in the market-cap weighted index. The S&P 500 and Nasdaq Composite each logged a fresh all-time high this week.

NVIDIA was a standout from the spaces, topping a $3 trillion market value on a closing basis for the first time ever this week.

The strength in semiconductor stocks and mega caps boosted the S&P 500 information technology (+3.8%), consumer discretionary (+1.5%), and communication services (+1.7%) sectors to solid gains this week. Meanwhile, the utilities (-3.9%) and energy (-3.5%) sectors logged the largest declines.

Concerns about economic growth kept the broader market in check in response to this week's economic data. The ISM Manufacturing Index for May reflected a faster pace of contraction than the market expected, job openings decreased in April compared to March, and the May Employment Situation Report showed higher than expected earnings growth.

Treasury yields settled lower in response to the data and in response to the first rate cut by the ECB since September 2019. The 10-yr note yield settled eight basis points lower this week to 4.43% and the 2-yr note yield declined two basis points to 4.87%.

• S&P 500: +1.3% for the week /+12.1% YTD

• Nasdaq Composite: +2.4% for the week /+14.1% YTD

• S&P Midcap 400: -2.1% for the week /+5.0% YTD

• Dow Jones Industrial Average: +0.3% for the week / +2.9% YTD

• Russell 2000: -2.1% for the week / UNCH YTD

Market Recap - WINNING MONTH ENDS WITH DOWNBEAT WEEK

The Stock Market Closed This Holiday-Shortened Week With Losses, But Closed This Month With Solid Gains.

Mega cap stocks had an outsized impact on index performance through 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. This week, however, the index logged a 0.5% decline. 

The downside bias this week was driven by some normal consolidation activity after the big run this month. 

Market participants had a slate of earnings news to get through this 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 CRM to close 13.9% lower than last Friday. 

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 this week in response to the data and in response to some poorly received Treasury sales. This 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 this week to 4.51% and the 2-yr note yield declined six basis points to 4.89%. 

• S&P 500: -0.5% for the week / +4.8% for the month /+10.6% YTD

• Nasdaq Composite: -1.1% for the week / +6.9% for the month /+11.5% YTD

• S&P Midcap 400: +0.2% for the week / +4.3% for the month /+7.2% YTD

• Dow Jones Industrial Average: -2.3% for the week / +2.3% for the month /+2.6% YTD

• Russell 2000: UNCH for the week / +4.9% for the month / +2.1% YTD

Market Recap - Mixed Market After NVDA Earnings, Retailer Earnings, and Econ Data

The Market Settled This Week In Mixed Fashion.

The S&P 500 and Nasdaq Composite, which reached a fresh all‐time high, closed with gains while the Russell 2000 and Dow Jones Industrial Average logged solid losses this week.

The first half of the week featured muted price action due to a wait‐and‐see mindset in front of NVIDIA's (NVDA) earnings after Wednesday's close. NVIDIA (NVDA) shares surged in response to impressive earnings and outlook, which also bolstered semiconductor stocks and AI‐related names. This did not translate into support for the broader market due to a sense that stocks are due for some consolidation.

The PHLX Semiconductor Index (SOX) jumped 4.8% this week, the Vanguard Mega Cap Growth ETF (MGK) logged a 1.6% gain, and the Russell 3000 Growth Index climbed 0.9%.

This price action benefitted the S&P 500 information technology sector, which logged a 3.4% gain on the week. The only other sector that closed higher was communication services (+0.3%). Meanwhile, the energy (‐3.8%) and real estate (‐3.7%) sectors logged the biggest declines.

Market participants were reacting to mixed earnings news from a slate of retailers. Target (TGT), Lowe's (LOW), TJX (TJX), AutoZone (AZO), Macy's (M), and others reported quarterly results this week.

There was also a batch of economic data, which also garnered mixed responses. The S&P Global U.S. Manufacturing PMI increased to 50.9 from 50.0 while the S&P Global U.S. Services PMI jumped to 54.8 from 51.3, the New Home Sales Report for April was weaker than expected, April Durable Orders were stronger than expected, and the final reading of the University of Michigan's Consumer Sentiment survey, which showed that year‐ahead inflation expectations slowed to 3.3% from 3.5% in the preliminary reading.

The 10‐yr note yield settled four basis points higher this week and the 2‐yr note yield settled 13 basis points higher at 4.95%.

As a reminder, markets were closed on Monday for Memorial Day.

• S&P 500: +0.03% for the week / +11.2% YTD

• Nasdaq Composite: +1.4% for the week / +12.7% YTD

• S&P Midcap 400: ‐1.3% for the week / +7.0% YTD

• Dow Jones Industrial Average: ‐2.3% for the week / +3.7% YTD

• Russell 2000: ‐1.2% for the week / +2.1% YTD

Market Recap - STOCKS REACH FRESH RECORDS AS YIELDS DECLINE

Stocks Rallied This Week And Rates Declined In Response To This Week's Economic Releases, Which Went The Market's Way In Terms Of Implications For Fed Policy.

The major indices all logged fresh record highs on an intraday and on a closing basis. This price action had the Dow Jones Industrial Average trading above 40,000 for the first time. 

Specific economic reports this week included the April Consumer Price Index (CPI), showing disinflation on a year-over-year basis in total CPI (to 3.4% from 3.5%) and core CPI (to 3.6% from 3.8%). This followed three consecutive hotter-than-expected CPI readings, along with some other recent reports that indicated sticky prices, which contributed to growing worries about the Fed staying restrictive for longer than anticipated.

Before the CPI report, market participants received the April Producer Price Index (PPI). The headline inflation readings were hotter-than-expected, up 0.5% month-over-month for total PPI and core PPI versus an expected 0.3% and 0.2%, respectively, but the sizable downward revisions to last month's readings kept the market response more mixed rather than negative.

Fed Chair Powell called the data "quite mixed" in a moderated discussion at the Foreign Bankers' Association's annual meeting.

Meme stocks exhibited a resurgence following the first X post by "Roaring Kitty" in three years. Shares of GameStop and AMC Entertainment were beneficiaries from speculative buying interest, jumping 27.2% and 51.2%, respectively, this week. 

In other corporate news, Dow component Home Depot received a negative response to its earnings report that stemmed from disappointing sales activity at the home improvement retailer.

• S&P 500: +1.5% for the week / +11.2% YTD

• Nasdaq Composite: +2.1% for the week / +11.2% YTD

• S&P Midcap 400: +0.7% for the week / +8.4% YTD

• Dow Jones Industrial Average: +1.2% for the week / +6.1% YTD

• Russell 2000: +1.7% for the week / +3.4% YTD

Market Recap - Busy Week Ends with Gains

The Stock Market Exhibit Somewhat Mixed Action This Week Amid A Slate Of Earnings News And Market-Moving Economic Releases.

Ultimately, the major indices all settled with gains on the week. The Russell 2000 is positive on the year following a 1.7% gain since last Friday.

Gains in the mega cap space had an outsized influence on index performance this week.

Apple and Amazon.com were standout winners in the mega cap space this week following pleasing earnings and outlook. Apple shares gained 8.3% and Amazon shares increased by 3.7%. 

Market participants were also digesting mixed economic releases. The Employment Cost Index for Q1 reflected a 1.2% increase in compensation costs versus expectations for a 1.0% increase. This report piled onto emerging worries about sticky inflation and about the Fed pushing back its rate cut timeline.

Fed Chair Powell calmed some of those fears during his press conference where he stated that it was "unlikely that the next policy rate move will be a hike." This followed the FOMC's unanimous decision to leave the fed funds rate range at 5.25-5.50%, as expected, noting that there has been a lack of further progress toward reaching the inflation target in recent months.

Friday's release of the April employment report was met with positive action. The report was weak enough to reduce concerns about a potential rate hike, but not weak enough to invite worries about the state of the labor market.

Nonfarm payrolls increased a smaller-than-expected 175,000 (Briefing.com consensus 250,000), average hourly earnings were up a smaller-than-expected 0.2% (Briefing.com consensus 0.3%), the unemployment rate was up a higher-than-expected 3.9% (Briefing.com consensus 3.8%), and the average workweek was a smaller-than-expected 34.3 hours (Briefing.com consensus 34.4).

Treasury yields settled the week lower in response to the data, acting as support for equities. The 10-yr note yield declined 17 basis points this week to 4.50%. The 2-yr note yield declined 19 basis points this week to 4.81%.

Only three of the S&P 500 sectors logged declines this week while the utilities (+3.4%) and consumer discretionary (+1.6%) sectors saw the largest gains. The energy sector was the weakest performer by a wide margin, dropping 3.4% as oil prices settled back below $80.00/bbl, down nearly 7.0% to $78.05./bbl. 

Also, the S&P 500 and Nasdaq Composite faced a technical overhang this week as the indices approached their respective 50-day moving averages. The S&P 500 was just a whisker shy of its 50-day moving average (5,129) at Friday's close while the Nasdaq Composite closed above its 50-day moving average (16,057). 

• Nasdaq Composite: +1.4% for the week / +7.6% YTD

• S&P 500: +0.6% for the week / +7.5% YTD

• S&P Midcap 400: +1.2% for the week / +5.3% YTD

• Dow Jones Industrial Average: +1.1% for the week / +2.6% YTD

• Russell 2000: +1.7% for the week / +0.4% YTD

Market Recap - STOCKS REBOUND AS EARNINGS SEASON RAMPS UP

The Stock Market Exhibited Some Rebound Action After A Soft Start To The Month. It Was A Busy Week, Featuring Earnings Results From Nearly 40% Of The S&P 500 And Some Key Economic Releases.

The Dow Jones Industrial Average rose 0.7%, the S&P 500 gained 2.7%, and the Nasdaq Composite settled 4.2% higher this week. 

The upside bias was fueled by favorable responses to earnings from some influential names, calm price action in Treasuries, and carryover momentum as gains built up this week.

Broad buying activity left the equal-weighted S&P 500 up 1.6% this week and all 11 S&P 500 sectors finished higher. Mega cap gains had an outsized impact on index performance, though, and drove gains in the information technology (+5.1%), consumer discretionary (+3.5%), and communication services (+2.7%) sectors. 

Meta Platforms was an exception from the mega cap space, dropping 7.9% this week after reporting earnings. Microsoft, Alphabet, which hit a new all-time high, and Tesla gained 1.8%, 11.5%, and 14.4%, respectively, in response to their earnings news. 

The quarterly reports from some of the aforementioned names fueled positive buzz around AI, benefitting stocks in the chipmaker space. The PHLX Semiconductor Index (SOX) jumped 10% this week. 

Market participants were also digesting the Advance Q1 GDP report, which showed weaker growth and higher inflation, and the weekly jobless claims report, which showed ongoing strength in the labor market, and the March Personal Income and Spending report, which that showed solid spending activity, but stalled progress on inflation. 

Treasuries had a relatively calm response to the data, contributing to the upside bias in stocks. The 10-yr note yield was five basis points at 4.67% and the 2-yr note yield rose three basis points to 5.00%. 

• S&P 500: +2.7% for the week / +6.9% YTD

• Nasdaq Composite: +4.2% for the week / +6.1% YTD

• S&P Midcap 400: +2.1% for the week / +4.1% YTD

• Dow Jones Industrial Average: +0.7% for the week / +1.5% YTD

• Russell 2000: +2.8% for the week / -1.2% YTD

Market Recap - RATE CUT ENTHUSIASM DRIVES STRONG GAINS

The Stock Market Had A Strong Showing This Week, Which Drove The Three Major Indices To Fresh Record Highs.

The S&P 500 for its part closed above 5,200 for the first time with a 2.3% gain this week. The Nasdaq Composite jumped 2.9% and the Dow Jones Industrial Average gained 2.0%.

The gains were largely in response to the FOMC policy announcement. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. This was expected and was not the reason for increased buying activity.

Buying increased due to the closely-watched dot plot, which is included in the updated Summary of Economic Projections (SEP), showing that the Fed still anticipates three rate cuts this year despite recent inflation readings coming in hotter than expected.

Fed Chair Powell's press conference following the FOMC policy announcement didn't deter the influx of buying. He largely reiterated prior comments, indicating that the Fed needs more evidence that inflation is moving toward the 2% target before cutting rates. Mr. Powell also said that it will be appropriate to slow the pace of asset runoff fairly soon.

Rate cut expectations moved up this week, contributing to the positive bias in the stock market. The implied likelihood of a June cut rose to 75.4% from 58.8% last week, according to the CME FedWatch Tool.

The price action in Treasuries also contributed to the positive bias in the stock market. The 2-yr note yield declined 12 basis point to 4.60% and the 10-yr note yield fell eight basis points to 4.22%.

Mega cap stocks had an outsized impact on index gains.

Only one of the S&P 500 sectors logged a decline -- real estate (-0.4%) -- while the communication services (+4.8%), industrials (+2.9%), information technology (+2.9%), and consumer discretionary (+2.8%) sectors saw the largest gains. 

• S&P 500: +2.3% for the week / +9.7% YTD

• Nasdaq Composite: +2.9% for the week / +9.4% YTD

• S&P Midcap 400: +2.3% for the week / +7.5% YTD

• Dow Jones Industrial Average: +2.0% for the week / +4.7% YTD

• Russell 2000: +1.6% for the week / +2.2% YTD