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Financial Market Update – Week of 06/24

June 24, 2024

Last week was one of mostly steady gains on Wall Street, with fresh records set for the S&P 500 and Nasdaq. Additionally, the S&P 500 marked the longest streak without a 2% drop since the Great Recession. 

Markets continue to digest the Fed’s pausing mode in earnest, feeling confident that inflation may have run its course in the eyes of the Fed. 

Summarizing the major U.S. equity indices last week, we saw the S&P 500 settle at yet another weekly closing high, rising by 0.61%; the Nasdaq 100 rose by 0.21%; and the Dow Jones Industrial Average outperformed the preceding two indexes, and perhaps played a little catch-up, rising by 1.45%.

Housing Inventory Builds

Amid higher interest rates, the U.S. housing market faces some stiff headwinds, albeit with a delayed fuse, as inventory has climbed in recent weeks.

Periods of 7.00%-plus 30-year mortgage interest rates seem to be impacting consumer demand and the desire to transact. 

The National Association of Realtors reported that existing homes declined in May by 0.7%, equating to a 2.8% decline from a year ago. Noteworthy.

Median prices, however, increased year-over-year by 5.8% to $419,300, the highest ever recorded.

Inventory data showed existing unsold homes grew substantially month-over-month by 6.7%, or the monthly equivalent of 3.7 months of supply.

Retail Sales Soften

For May, we saw retail sales rise less than expected, clocking in at a gain of 0.1% versus the Dow Jones estimate of a 0.2% gain.

Online retail sales increased by 0.8%, while bars and restaurants experienced a 0.4% decline. Furniture and home furnishing stores also saw a 1.1% drop.

Automobiles were the primary catalyst for the rise. In fact, excluding autos, sales declined 0.1%.

Energy in Conversation

While people may have bought cars and trucks in May, it seems that consumers are driving less. Gasoline sales declined for the month, historically viewed as the beginning of the summer peak driving season.

U.S. gasoline station sales are at a current level of $53.58 billion, down from $54.80 billion last month and up from $52.76 billion one year ago. So, gasoline sales were down on a monthly basis, yet higher year over year.

At the same time, crude oil rallied last week to reach seven-week highs, as U.S crude and gasoline inventories fell, with supply concerns in focus.

According to AAA, gasoline prices in the United States were at a national average of $3.447 per gallon as of 06/23/24. However, prices in the West Coast and Hawaii were as high as $4.81 per gallon as of the same date.

Fed’s Favorite on Deck

This Friday’s Personal Consumption Expenditures (PCE) will be the big data release this week, as traders and money managers look for reinforcement of the recent lower-than-expected inflation data prints in CPI & PPI.

PCE data expectations heading into this week are for no change in May on a month-over-month basis and for a minimal 0.1% gain in core PCE, which excludes food and energy.

The Takeaway 

Major U.S. equity market indexes have continued their solid ascent in recent weeks, buoyed by recent inflation readings and expectations for a Fed that is satisfied with the progress on inflation.

As more trading days go by, the outlook for lower interest rates should increase. Let’s remember that  markets love to look ahead to the next big thing.

While CPI data showed some cooling in May, it is just one data release, and markets are looking for further confirmation of an inflation-cooling trend with this week’s PCE data release.

CNN’s Fear and Greed Index shows fear in the marketplace, which could indicate many folks have missed this recent rally. Staying invested for the long run is the surefire way to avoid emotionally charged financial decisions.

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