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Financial Market Update – Week of 06/10

June 10, 2024

Major U.S. stock market indexes traded to the upside last week, with the Nasdaq and S&P 500 both trading at record highs. 

Overall, the S&P 500 rose by 1.32%, the Nasdaq 100 increased by 2.50%, and the Dow Jones Industrial Average was higher by 0.29%.

The AI narrative showed renewed strength last week with NVIDIA leading the way, providing the backdrop for tech’s dominance in the indexes.

Payrolls Shock to Upside

To the dismay of Fed rate cut bulls, Friday’s May jobs data release showed gains of 272,000 jobs versus Dow Jones estimates for 190,000. This figure was also much higher than April’s gains of 175,000.

The recent job gains were primarily focused on healthcare, government, and leisure and hospitality, in line with current trends. With the Fed meeting in play this week, bulls took a bit of a breather after this on Friday, but the S&P 500 still closed at a weekly all-time high.

The jobs data provides a fresh signal that the economy could be running too hot to cut interest rates soon. However, we will get fresh Consumer Price Index (CPI) data on Wednesday morning ahead of the Fed later in the day. 

Fed Decision Imminent

On Wednesday, we get the latest broadcast from the Federal Open Market Committee (FOMC) on the future direction of monetary policy.

Last week showed some developments internationally regarding central bank interest rates. Despite lingering inflationary pressures, the European Central Bank (ECB) cut rates by 0.25% and the Bank of Canada (BoC) also cut rates by 0.25%.

Could the Fed follow suit? As of last Friday’s market close, there was a 97.8% probability of no change in interest rates and a 2.2% chance of a rate cut, according to the CME FedWatch Tool. Friday’s jobs data also makes that less likely. 

That said, we’ll see what the Fed has in store for Wednesday along with the telegraphing for future policy.

A Busy Wednesday in a Full Week

On Fed Day (Wednesday), we will get CPI in the morning (8:30 AM) and then the Fed rate decision and statement (2:00 PM), and the subsequent Q&A session. If you like catalysts, Wednesday is surely your day.

After the dust settles on Wednesday, the Producer Price Index (PPI) data is on deck for Thursday morning, along with weekly unemployment claims.

And to finish this week, a fresh check on the state of the consumer arrives via preliminary University of Michigan Consumer Sentiment data. The previous report showed the consumer becoming more cautious —  we will see what this report has in store for us.

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