Stocks closed mixed on Friday, as the Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) clinched their fifth consecutive record high. At the same time, the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA) were slightly lower at the closing bell after a report showed consumer sentiment unexpectedly declined to its weakest level since November 2023. Still, all main indexes except the DJIA clocked in another winning week.
The technology sector’s gains led last week’s rally even as the Federal Reserve dialed back their interest-rate reduction expectations. The Fed is now projecting just one rate cut this year, down from the three that had been previously forecasted in March. Still, market participants were encouraged by the latest economic reports, including consumer and producer inflation metrics that continued to decline, suggesting that the Federal Reserve has the upper hand in its battle with sticky inflation.
In addition, stocks were propped by positive surprises received from technology majors such as Apple (AAPL), Oracle (ORCL), and Broadcom (AVGO). However, disappointment with the less dovish-than-hoped Fed rate outlook weighed on most S&P 500 sectors, with only IT, Communication Services, and Real Estate ending the week in the green. All major market indexes have seen a significant degradation in market breadth over the past month as gains have been concentrated within large- and mega-cap tech.
Many analysts believe that the Federal Reserve’s policy outlook is leaning conservative. However, should the disinflation trend continue as reflected in the latest CPI and PPI reports – or if the labor market and wage gains cool more than currently anticipated – policymakers may turn more dovish. If economic reports in the next couple of months confirm the outlook of normalizing price pressures, the rate-cut expectations may be brought forward, thus opening the door for improved market conditions.
Four Economic Events
Here are four economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» May’s Retail Sales – Tuesday, 06/18 – This report provides information on the amount of money consumers are spending on various durable and non-durable goods. It helps to gauge the economy’s health, consumer spending habits, and the level of demand-side inflation pressures.
» May’s Industrial Production – Tuesday, 06/18 – This report shows the volume of production of U.S. industries like manufacturing, mining, and utilities. Although industrial production accounts for a smaller portion of economic activity than services, its sensitivity to consumer demand and interest rates makes it a leading indicator of GDP growth and economic performance.
» June’s S&P Global Manufacturing PMI (preliminary reading) – Friday, 06/21 – This report captures business conditions in the manufacturing sector, which contributes a significant part of total GDP. The manufacturing PMI is considered an important indicator of business conditions and the overall economic climate in the U.S.
» June’s S&P Global Services PMI (preliminary reading) – Friday, 06/21 – This report captures business conditions in the services sector; it is a crucial indicator since the services sector is responsible for over 70% of total U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
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