Markets This Week, 6/19-6/23, 2023: A Hawkish Pause and a Broad Rally

Economy and Markets: The Week Ahead

The main focus of this week will be not the economic reports (although there are some important ones published in the next few days), but the FOMC members’ speeches.

As the Fed performed a “hawkish skip,” pausing rate increases for the first time since early 2022, the policymakers also updated their projections for the Fed Funds rate at the end of this year, raising it to 5.6% from the previous 5.1%. Jerome Powell said that high and sticky inflation is still a concern, and most members of the Committee see further increases this year as appropriate. Indeed, the updated “dot-plot” projection signals two more 25 basis point hikes in 2023.

Equities – Last Week’s Performance & Outlook

Meanwhile, although stocks wobbled after the Fed’s hawkish projections, the Tech rally still seems more powerful than the policymakers’ words. Stocks extended their gains, with the Nasdaq Composite (NDAQ) registering its longest weekly winning streak since 2019. The technology index surged 2.72% on the week, while the large-cap Nasdaq 100 (NDX) jumped 3.30%. The S&P 500 (SPX) rose 2.26% for a fifth consecutive winning week, in the longest stretch of gains since November 2021.

More importantly, all but one sector (Energy) rose on the week, which may signal a possible widening of the rally to non-technological stocks. If this development continues, it may signify that we are truly in a bull market, as opposed to a bear-market rally which many on Wall Street have declared, based on the narrowness of the gains up to this week.

On the other hand, Citi (C) strategists forecast that the rally will run out of steam soon, as they see the current level as disconnected from the earnings and economic outlook. This view is shared by Bank of America (BAC), Morgan Stanley (MS), and others.

Whether the bull market has legs or not, we are still traversing one of the most unpredictable patches in stock market history. With this level of uncertainty, investors are advised to base their decisions on trustworthy data and analysis.

Upcoming Earnings and Dividend Announcements

The Q1 2023 reporting season has ended, but some important reports are still coming out this week from companies whose fiscal year is shaped differently.

The most anticipated releases this week include FedEx (FDX), Accenture (ACN), Darden (DRI), and CarMax (KMX).

Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.

This week, Ex-Dividend dates are coming for the payouts of Broadcom (AVGO), TotalEnergies (TTE), Carrier Global (CARR), Philip Morris (PM), and other dividend-paying firms.

Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.

Upcoming Events – Economic Calendar

This week is loaded with the Federal Reserve governors’ speeches, but light on economic reports. Still, there are some important reports scheduled to be published in the next few days:

» On Tuesday, we’ll have a glimpse into the state of the housing market with the help of May’s Housing Starts and Building Permits reports.

 » On Thursday, we’ll receive May’s Existing Home Sales report, giving us a further dive into the housing data. We’ll get May’s Chicago Fed National Activity Index (CFNAI) on the same day.

» On Friday, we’ll see published the preliminary data for the all-important June’s S&P Global Manufacturing and Services PMIs.

Current and scheduled economic reports, Fed statements, and other releases, as well as their level of impact on stock markets, can be found on the TipRanks Economic Calendar.

Major Economic Events of the Past Week

The U.S.

» May’s S&P Global Services PMI declined to 54.9 from April’s 55.1; it was expected to remain unchanged.

» May’s NFIB Business Optimism Index rose to 89.4 from April’s 89, pointing to an improvement in small business conditions and outlook.

» May’s CPI rose 4% year-on-year, versus the expected 4.1% and April’s 4.9%. Month-on-month, headline inflation has dropped to 0.1%, compared to April’s 0.4% and the expected increase of 0.2%.

» May’s CPI Ex Food & Energy (Core CPI) rose 5.3% year-on-year and 0.4% month-on-month, in line with expectations, versus April’s 5.5% and 0.4%, respectively. The numbers confirm that along with the fall in energy prices and a seasonal decrease in food prices, the inflationary pressures continue to be too high for the Fed to terminate its inflation-fighting efforts.

» May’s Producer Price Index (PPI) rose 1.1% year-on-year, less than the expected 1.5% increase and down from April’s 2.3%.

» Initial Jobless Claims for the week ending June 8^th came in at 262K versus the expected 249K. Continuing Jobless Claims for the week ending June 2^nd were at 1.775M, higher than the expected 1.765M.

» May’s Retail Sales rose 1.61% year-on-year versus April’s 1.23% increase.

» June’s NY Empire State Manufacturing Index unexpectedly jumped to 6.60 from May’s reading of -31.80.

» June’s Michigan Consumer Sentiment Index jumped to 63.9 from May’s level of 59.2; it was expected to increase to 60.0.

Eurozone

European Central Bank (ECB) lifted its deposit rate by 25 bps to 3.5%, its highest level in more than two decades.