Weekly Market Commentary: June 4-10
The Bull is Back for the S&P 500
Last week was a quiet one for trading, and markets seemed to be holding their breath in the days leading up to this week’s Federal Reserve meeting. Although it wasn’t a stellar performance week, the S&P 500 reached a notable milestone: The index hit 20% up from October lows, bringing it back into bull territory.
Is it a strong bull or a skittish one? Whether it sticks around is largely reliant upon what happens with interest rates this week. It’s still not entirely clear if the Fed will pause rate hikes at its Tuesday and Wednesday meeting, especially with economic data still sending mixed signals. Last week, the Labor Department reported that weekly jobless claims jumped to 261,000, the highest level since October 2021 and a sign the red-hot jobs market may be cooling. But continuing claims fell unexpectedly and hit their lowest level in nearly four months. It’s just another confounding data point for the Fed as it decides whether to raise rates again or take a bit of a breather.
But the consensus seems to be for a rate hike pause. Data released on Tuesday showed the service sector is experiencing a decline in prices. Plus, the latest consumer price index (CPI) and producer price index (PPI) numbers are scheduled to be released on the same days as their meeting. Right now, the CPI (the major indicator for inflation) is forecast to come in at 4.1% for May, down from 4.9% in April. Lower prices in the services sector, plus lowering CPI/PPI, would help push the Fed’s decision to the side of keeping rates where they are, although a 4% inflation rate is still double the Fed’s target rate of 2%.
But if the Fed does decide to stay put this month, is it a pause — or is it more of a “skip?” Calling it a skip suggests that more rate hikes could come later. Analysts will be closely examining Fed Chair Jerome Powell’s post-meeting remarks on Wednesday for a hint that future hikes may still be on the table. If they are — or if the Fed unexpectedly raises rates again this month — those 20% highs in the S&P 500 may be short-lived.
Coming this Week
The biggest market-mover this week will be the Fed meeting on Tuesday and Wednesday. Will Chairman Powell’s comments hint at potential future hikes — or have we reached our highest rates in 2023?
Markets will also pay close attention to CPI and PPI numbers released on Tuesday and Wednesday, respectively.
Other data this week will come out mostly on Thursday and will include U.S. retail sales, import prices and business inventories. Weekly initial jobless claims, which have been on the rise, will also be released Thursday.
Just a reminder that markets will have a three-day weekend, as Wall Street is closed on June 19 for Juneteenth.
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