Weekly Market Performance — May 17, 2024

U.S. equities continued their remarkable run in 2024, with many major indexes reaching new record highs this week. The Dow Jones Industrial Average (DJIA) achieved a particularly significant milestone, briefly surpassing the 40,000 mark. The S&P 500 also achieved a new all-time high and registered its fourth consecutive weekly gain. This positive momentum was fueled by several factors, including a welcome decline in consumer inflation data and continued strength in the technology sector. The fixed income market also benefited from the softer April inflation data as the Benchmark Bloomberg Aggregate Bond Index traded to its highest level since early April. However, less dovish comments from a trio of Fed officials saw bonds finish off their best levels of the week.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 05/17/24 @ 2:30 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: U.S. equities delivered another solid week, pushing the S&P 500, Nasdaq, and Dow Industrials all to fresh record highs. The Dow touched 40,000 intraday for the first time on Thursday and traded very near that milestone late Friday. The S&P 500 rose roughly 1.5% for the week, its fourth straight weekly gain. Much of the weekly gain came on Wednesday, when stocks and bonds rallied on improving consumer inflation. Small caps, which benefited from rising markets and lower interest rates, outperformed slightly for the week. Despite solid gains in some of the biggest technology stocks this week, the technology stocks within the Russell 2000 Index outperformed those in the larger-cap Russell 1000.

A strong week for the technology sector, including notable strength in semiconductors, especially NVIDIA (NVIDIA), and Apple (AAPL), paved the way for weekly outperformance from the Russell 1000 Growth Index over its Value counterpart. The value style index was weighed down some by energy sector underperformance. Real estate, which got a boost from lower interest rates, outperformed on solid gains in data center REIT Equinix (EQIX), wireless tower plays American Tower (AMT) and Crown Castle (CCI), and storage REITs. (Note, our real estate blog on Wednesday can be found here). Consumer discretionary, which was weighed down by weakness in Amazon (AMZN) and soft retail sales for April, was among the underperforming sectors for the week along with industrials.

International Equities: Global markets were broadly higher this week, with notable strength in emerging markets (EM), led by China as the MSCI China rallied 3% for the week through Thursday (in U.S. dollars). China’s markets garnered support from a wide-ranging stimulus program to support its property markets as well as well-received earnings reports from several big names including JD (JD), Tencent (TCEHY) and Alibaba (BABA). Japan’s Nikkei was also a solid gainer for the week as the yen currency firmed, slightly outpacing Europe, which also rose for the week, boosted by a weaker U.S. dollar.

Central banks remain in focus in these developed markets as the European Central Bank (ECB) appears ready to cut rates as soon as next month while the Japanese government and Bank of Japan stand by ready to support the yen if needed. Japan’s first quarter GDP contracted more than expected as an earthquake and other temporary disruptions in the auto sector dragged down growth. While the report dampened expectations for rate hikes to prop up the yen, growth is expected to pick back up again in the second half of 2024.

Fixed Income: The Bloomberg Aggregate Bond Index traded nicely higher on the week following a slightly better-than-expected April inflation report on Wednesday, which re-opened the path for multiple rate cuts before the end of the year. However, less than dovish comments from a trio of Fed presidents later in the week dampened some of the enthusiasm as they suggested that the Fed will prioritize further inflation data before moving to ease rates. This stance left bonds trading well below their best levels of the week. All eyes are now on next week’s release of the FOMC minutes, which should give further clarity on the Fed’s current thinking and future policy direction.

Commodities: The benchmark Bloomberg Commodities Index had a strong week and traded to its highest level since November. Copper was the main story in the commodities complex as the COMEX front-month contract traded to a record high of more than $5 per pound and was up more than 10% at one point in the week before finishing off at its best levels. A large price difference between U.S. and other global exchanges sparked a frenzy for the red metal as investors rushed to secure and ship copper to the U.S. where prices were as much as $1,200 a ton higher. On the year, copper has gained just under 25% as the rally has been fueled by the data center boom and global electrification initiatives. Elsewhere, cocoa had its sharpest one-day decline in more than six decades on Monday and finished the week down over 16%. The commodity has now declined more than 35% from the all-time high recorded in April as the supply outlook has begun to incrementally improve.

Economic Weekly Roundup

Housing: Housing starts for both single-family and multifamily projects rebounded but remained below pre-pandemic levels. Investors should closely watch these leading indicators to track any potential change in trajectory. Residential construction should remain solid despite the risks of other areas of the economy slowing down. Years of undersupply and few homes on the market are supporting the residential markets.

Import prices. Prices for imported industrial supplies continued to rise at a fast pace in April, adding to some concern about the pipeline of goods inflation. However, auto-related import prices seem well-contained as supply chains recover from recent disruptions. Imported capital goods prices, an important component for businesses, rose last month but are still down from a year ago. Bottom Line, import prices rose faster than expected, but when you dig deeper into this week’s report, the pipeline of inflation does not appear to be at risk for any resurgence of consumer inflation.

Consumer inflation. Both headline and core consumer prices rose 0.3% from a month ago, slightly slower than the pace of the previous few months. This report gave us some good signs that services inflation is easing. Grocery prices fell in April, giving some relief, especially for those buying meats, fruits, and vegetables. The “soft landing” narrative is still a possibility but not a guarantee, and the weak retail sales report for April did not help. Bottom Line, despite this week's encouraging inflation report, the Fed will not likely begin cutting rates until they have more confirmation that consumer prices are easing. As the week ended, markets were expecting the first rate cut to come in September. (We recapped this week's consumer inflation data here.)

Retail sales. The control group of retail sales — the category which feeds into the GDP calculations — fell 0.3% in April, suggesting that consumer spending downshifted at the beginning of the second quarter.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: No Releases
• Tuesday: Philadelphia Fed Non-Manufacturing (May)
• Wednesday: MBA Mortgage Applications (May 17), Existing Home Sales (Apr), FOMC Minutes (May 1)
• Thursday: Chicago Fed Nat Activity Index (Apr), Initial Claims (May 18), Manufacturing PMI (May), Services PMI (May), New Home Sales (Apr), KC Fed Manufacturing Activity (May)
• Friday: Durable Goods (Apr), University of Michigan Sentiment (May), KC Fed Services Activity (May)