Weekly Market Performance — June 28, 2024

U.S. equities faced an eventful week marked by key economic data and the first (and possibly last?) presidential debate for the 2024 election. Despite multiple market catalysts, major indexes ended the week mostly higher. Artificial intelligence (AI) stocks saw a slight pause in their most recent rally, allowing some other individual names to shine on earnings results and future business developments. The Treasury market had a turbulent week with yields fluctuating and bond prices broadly closing lower. The Japanese yen continued to slide against its peers, raising speculation about another intervention from the Japanese government.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 06/28/24
Disclosures: Indexes are unmanaged and cannot be invested directly.

U.S. and International Equities

Markets: In a choppy week of trading, major U.S. indexes were mostly higher despite an array of dynamics influencing markets. Economic data, major earnings announcements, and Thursday's presidential debate were in focus for stock investors as the first half of 2024 came to a close. The S&P 500 added around 0.2% and the Nasdaq Composite advanced nearly 0.8%. Value stocks and the Dow Jones Industrial Average popped early this week but shed gains for the remainder of the week; the Dow closed slightly lower, declining nearly 0.5% on the week. Notably, the Russell indexes prepared to undergo their quarterly reconfiguration Friday, including the Russell 1000 large cap indexes, set to take effect after Friday's closing bell.

Mega cap AI names, which have propelled the stock market higher for most of 2024, pulled back slightly this week, turning attention to other outperforming names. Shares of Magnificent Seven member Amazon (AMZN) surged on Wednesday after the company announced it will introduce a discounted shopping option. In a separate headline, shares of electric automaker Rivian (RIVN) soared after Volkswagen announced plans for a joint venture and an initial $1 billion investment. Several major companies reported earnings this week, including FedEx (FDX), which shares saw a boost from a positive earnings surprise. However, some companies' quarterly results and guidance fell short of Wall Street's expectations, sending shares of Micron Technology (MU), Nike (NKE), and Walgreens (WBA) sharply lower.

Key economic releases featured last week’s continuing jobless claims and revised GDP figures for the first quarter (Q1), both released on Thursday, along with Personal Consumption Expenditure (PCE) data on Friday. The number of continuing jobless claims saw a slight increase, suggesting a slight cooling in the labor market, while the final read on first quarter GDP was revised upwards slightly. However, overall macroeconomic data was mixed, consistent with a slowing economy.

In European markets, investors were cautious of making big bets this week ahead of the French election on Sunday. Concerns were heightened regarding France's fiscal stability, with potential impacts on public debt or taxes from both far left- and far-right-wing parties. Also impacting markets was conflicting commentary from European Central Bank (ECB) officials regarding potential rate cuts, adding to general rate cut uncertainty. Similar to the U.S., the United Kingdom (U.K.) also released its final Q1 GDP numbers Friday morning and saw an upward revision. The STOXX 600 index, a major index benchmarking European markets, ended the week lower. In Asia, major indexes across the region were mixed. Japan's indexes saw notable weekly gains, while markets in greater China rallied on Friday but still ended the week near four-month lows. South Korea's Kospi index posted weekly gains, and India continued its recent advance, clinching fresh records mid-week.

Fixed Income: Bonds faced another bumpy ride in reaction to the slate of economic data released throughout the week. The Bloomberg U.S. Aggregate Index closed lower this week as yields moved higher. The 10-year Treasury yield inched back above 4.3% for the first time in two weeks. Treasury auctions continued to be well received, as another $183 billion (total) in two-year, five-year, and seven-year notes were auctioned this week. On Wednesday, yields saw upward pressure from the weakening of the Japanese yen, combined with hotter-than-expected inflation reports from Canada and Australia, which led to routs for their sovereign bonds. Yields slipped on Thursday in reaction to revised U.S. GDP data showing lackluster economic growth, however, the most significant driver was Friday's PCE data, which sent yields soaring. In the second quarter, yields ticked a few basis points lower, and the Bloomberg U.S. Aggregate Index ultimately climbed higher despite elevated volatility.

Commodities: The Bloomberg Commodity Index traded lower this week, declining by over 1.0%. Crude oil and gasoline futures turned lower on Friday, erasing potential weekly gains amid concerns about global energy demand. Gold futures dipped midweek but steadied on Friday, reaching for a third consecutive quarterly gain following this morning's inflation data. The yellow metal was relatively flat for the week as the incremental pullback in inflation continues to be somewhat supportive for the gold market. Silver futures were also roughly unchanged on the week, and copper futures slipped nearly 0.5%. The dollar strengthened against other major currencies again this week, while the Japanese yen weakened to levels not seen since 1986. The current question in global markets is whether another intervention from the Japanese government is being planned, as officials have made it clear they are ready to act at any time. Soft commodities were mixed on the week, with many futures pulling back at midday on Friday. Corn prices were sharply lower due to higher-than-expected acreage and stocks, also putting pressure on wheat and soybeans. Wheat futures faced the largest decline since June 2022.

Economic Weekly Roundup

Good News on the Inflation Front. The Fed’s preferred inflation metric was roughly unchanged in May from a month ago, pulling the annual headline and core rates of inflation down to 2.6%. This is encouraging news for capital markets. Again, we observed a bifurcation within goods and services. Goods prices fell 0.4% from a month ago, but services prices increased by 0.2%. The largest contributor to services spending was air transportation. The TSA throughput data reached another high recently and support the thesis that consumers have an insatiable appetite for travel. Core services inflation ex-housing grew 3.39%, the slowest pace since last year. Real disposable personal income rose 0.5% last month after a stall in April. A tight labor market is supporting income.

The soft inflation data will build the case that the Fed can start cutting rates in the coming months. As long as incomes grow at a healthy clip, consumers will keep spending. The key is the labor market, so we shift our attention to next week’s nonfarm payroll release for a fresh perspective into the job market.

Residential Investment Boosted Q1 Growth. The government revised up Q1 growth because of a much stronger contribution from residential construction. Residential fixed investment was stronger than initially reported, growing an annualized 16% from the previous quarter and adding roughly 0.6% to headline growth of 1.4%. Consumer spending was revised downward again and indicates the trajectory for consumer spending looks weaker for the rest of the year. In a separate report, retail inventories grew in May and suggest inventory rebuilding should add to Q2 growth. Shipments of nondefense capital goods fell in May and are an important bellwether for business fixed investment in the coming quarters.

Continuing claims inched higher and are now the highest since late 2021, sending a warning sign that the labor market could be softening. We expect both consumer and business activity to slow in the latter half of 2024, giving the Fed ample opportunity to begin cutting rates later this year.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: S&P U.S. Manufacturing PMI (June), Construction Spending (May), ISM Manufacturing (June), ISM New Orders (June), ISM Prices Paid (June), ISM Employment (June)
• Tuesday: JOLTS Job Openings (May), Wards Total Vehicle Sales (June)
• Wednesday: MBA Mortgage Applications (June 28), Challenger Job Cuts (June), ADP Employment Change (June), Trade Balance (May), Initial Jobless Claims (June 29), Continuing Claims (June 22), S&P Global U.S. Services PMI (June), S&P U.S. Composite PMI (June), Factory Orders (May), ISM Services Index (June), ISM Services Prices Paid (June), ISM Services Employment (June), Durable Goods Orders (May), ISM Services New Orders (June), Cap Goods Orders Nondefense ex. Aircraft (May), Cap Goods Ship Nondefense ex. Aircraft (May), FOMC Meeting Minutes (June 12)
• Thursday: July 4 Holiday
• Friday: Two-Month Payroll Net Revision (June) Change in Nonfarm Payrolls (June), Change in Private Payrolls (June), Change in Manufacturing Payrolls (June), Unemployment Rate (June), Avg. Hourly Earnings (June), Average Weekly Hours All Employees (June), Labor Force Participation Rate (June), Underemployment Rate (June)