Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
Last week US stocks were up about 2 percent, almost completing a six-week 5 percent round trip. The S&P 500 recorded an all-time high at the end of March, then fell 5 percent over the following three weeks as investors pushed out their expectations for Fed rate cuts. A strong earnings season, coupled with a weaker-than-expected, and Fed-friendly, April jobs report was enough to turn the ship around, and now the S&P 500 is almost back to where we started at the end of the first quarter.
The yield on the US 10-year Treasury finished the week essentially unchanged at 4.50 percent. WTI crude oil and gold both finished marginally higher.
A strong earnings season has driven US stocks higher over the last several weeks. With well over 80 percent of the S&P 500 having reported results, companies are on track to have increased earnings by almost 8 percent, well above expectations. Generally strong results from most of the so-called Magnificent Seven growth stocks are once again driving the market. These are the same names that help propel the stock market higher last year due to their outsized earnings and huge weightings in the S&P 500.
The US labor market is showing more signs of weakness, but investors aren’t worried because it gives the Fed more cover to cut rates sometime this year. Following a weak April jobs report in the prior week, last week unemployment insurance claims came in higher than expected, to the highest level in more than eight months.
The US consumer is becoming increasingly cautious despite showing no slowdown in spending. Consumer sentiment dipped in May amid a hotter inflation outlook. The May University of Michigan Consumer Sentiment Index came in well-below expectations. Last’s week’s report also showed that consumers expect the inflation rate to rise rather than fall.
We have a full economic calendar this week. Investors will get to parse through a host of data, including releases surrounding inflation, consumer spending and housing. We start off with the Producer’s Price Index, or PPI, on Tuesday. We follow up with another popular gauge of inflation on Wednesday, with the Consumer Price Index, or CPI. On the same day, we also get Retail Sales and the Housing Market Index. On Thursday we get Housing Starts and Building Permits, Export and Import Prices, and Industrial Production. Then we finish up the week with the Leading Economic index on Friday.
As always, we will be watching and reporting back to you next week. Thank you.
