Weekly Market Performance — June 14, 2024

LPL Research provides its Weekly Market Performance for the week of June 10, 2024. U.S. stocks had a week of records — the S&P 500 and NASDAQ Composite stringing together new all-time highs. Technology fueled the rallies as artificial intelligence (AI) and semiconductor names soared on earnings from Broadcom (AVGO) and Adobe (ADBE) and new operating system and product announcements from Apple (AAPL). Bonds ticked higher as well, largely in reaction to cooling economic data and extremely successful auctions. The dollar was stronger this week, the greenback boosted by France’s political challenges.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 06/14/24 @ 2:45 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

Markets: U.S. stocks delivered a solid week, with the tech-heavy NASDAQ over 3% in the green, followed by the S&P 500 gaining nearly 1.5% this week, and the industrials heavy Dow shed a little over 0.5%. Markets were relatively quiet to start the week ahead of a much-anticipated economic calendar. Cooler-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) data buoyed stock and bond markets, combined with generally dovish commentary from the Fed.

Technology was the top-performing sector, with AI and semiconductors remaining strong tailwinds for markets this week. After slipping on Monday, AAPL shares rallied the remainder of the week on plans for a new personal generative AI offering in partnership with OpenAI for iPhones, iPads, and Macs. Chipmakers Broadcom (AVGO) and NVIDIA (NVDA) were among other strong tech performers this week. On Wednesday, just two days after NVIDIA’s 10-for-1 stock split went into effect, Broadcom beat earnings and announced a 10-for-1 stock split. Real estate and communication services also outperformed, both benefiting from the rates and tech tailwinds, while energy and financials lagged on the week.

Across the Atlantic, European equities faced a rocky week and finished broadly in the red. Political upheaval in France following President Emmanuel Macron’s call for a snap election drove a sell-off for both equities and fixed income. This was a focal point for markets throughout the week, erasing year-to-date gains for French stocks and driving substantial volatility in Italy as well. The French utility, energy, and banking sectors were heavily affected, each ending the week down over 4%, though drug and grocery stores and healthcare outperformed the STOXX 600. Asian equities were mixed broadly; however, Chinese automakers weathered the storm around electric vehicle (EV) tariffs from the EU.

Fixed Income: U.S. Treasuries experienced elevated volatility during a busy week, however the Bloomberg Aggregate Bond Index was higher on the week. Wednesday’s soft CPI data turned out to be the largest market mover this week as yields fell immediately following the release. However, the drop in yields mostly offset the large increase in yields that took place after last Friday’s stronger-than-expected jobs report. The (Fed’s updated dot plot, illustrating the expected path for short-term interest rates by Fed members, showed only one rate cut this year. The updated dot plot and Wednesday’s Fed meeting didn't move markets in either direction, as much as expected.

The Treasury Department held auctions for $119 billion (total) of 3-year, 10-year, and 30-year bonds. The 3-year auction was met with weak demand, but the 10-year and 30-year auctions were bright spots. Recent longer-maturity auctions have been mixed, as investors are unwilling to take on too much duration risk given the uncertain path for rate cuts. The solid demand at the 10-year auction was initially taken as investor demand positively shifting, which was further confirmed by an excellent 30-year auction. The stellar demand has seemingly shifted the narrative that we are likely past peak rates and investors are trying to lock in yields for longer.

Commodities: The broader commodities complex traded higher this week, with the Bloomberg Commodity Index increasing around 0.70%. Following last week’s oil sell-off on the decision by OPEC+ to restore supply and update demand forecasts, West Texas Intermediate (WTI) delivered an increase of around 4%, rebounding from almost four-month lows. This week’s big economic releases and the political landscape in France pushed the dollar higher, and the euro lower. The strength in the dollar also put downward pressure on the Japanese yen, which is also being softened by the Bank of Japan’s (BOJ) decision to delay reducing bond purchases. The gold market continued to be strong with futures rallying around 1% on Friday to earn the first weekly gain in four. Copper was little changed for the week.

Economic Weekly Roundup

Monthly inflation softer than expected. Consumer prices were unchanged in May, pulling the annual rate of inflation down to 3.3% after rising 0.3% month-to-month in April. The headline energy component fell 2% from a month ago, driven by a 3.6% decline in gas prices. Airfare, new car prices, and clothing were among the categories that decreased in May. Grocery prices were unchanged in May after falling in April, giving some reprieve to consumers, although price levels are still very high. Restaurant prices continue to rise as consumers have an insatiable appetite for going out to eat. Looking ahead, this category may be an important leading indicator for consumer sentiment amid a slowing economy. Bottom Line, softer inflation is good news for the Fed.

FOMC revised forecasts as expected. As expected, the longer-run fed funds rate rose to 2.8% from 2.6% in the previous Summary of Economic Projections (SEP). No longer without proof, the Federal Open Market Committee (FOMC) believes we have seen a modest improvement with inflation. Unemployment will likely increase faster than previously reported. The median projection is that unemployment will rise to 4.2% next year, still historically low and based on expectations that the labor market will not materially weaken. Inflation pressures will take longer to dissipate, and core inflation may not reach the 2% target until 2026. Economic growth will slow but remain above the long-run rate for the next couple of years.

There’s no denying the progress toward the Fed’s 2% target but the real debate is the time frame. Barring any exogenous shocks, the economy will slowly converge to the Fed’s target. Since parts of the economy are less sensitive to interest rates in this business cycle, the Fed is constrained to keep rates higher for longer. Expect to hear more about this at the Jackson Hole Symposium in August.

PPI fell the most since October 2023. Monthly changes in producer prices are volatile, but still markets should be encouraged with May’s PPI report. The decline is a bit of payback from the outsized gain in April. The fall in producer prices pulled the annual rate down to 2.2%, close to pre-pandemic trend. Food prices fell for the second consecutive month, indicating further easing in end-consumer grocery prices. The decline in energy and food prices accounted for the decline this month as crude oil prices fell in May.

As we heard in the Fed's press conference, the FOMC saw modest progress with inflation dynamics, and we expect future inflation reports will solidify their view. Given the macro landscape, the Fed will likely begin cutting rates later this year, but some of the stickier components must show signs of easing before they can commence with a cut.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Empire Manufacturing (June)
• Tuesday: NY Fed Servies Business Activity (June), Retail Sales (May), Industrial Production (May), Capacity Utilization (May), Manufacturing Production (May), Business Inventories (April), TIC Flows (April)
• Wednesday: Market Holiday (Juneteenth), MBA Mortgage Applications (June 14), NAHB Housing Market Index (June)
• Thursday: Current Account Balance (Q1), Initial Jobless Claims (June 15), Continuing Claims (June 8), Housing Starts (May), Building Permits (May), Philadelphia Fed Business Outlook (June)
• Friday: S&P Global U.S. Manufacturing PMI (June), S&P Global U.S. Services PMI (June), S&P Global U.S. Composite PMI (June), Leading Index (May), Existing Home Sales (May)