Mixed Signals from the Fed Shake Up Markets:
As Q2 came to a close, stock performance remained mixed last week while investors digested a fresh round of economic data and some surprising comments from the Fed.
The S&P 500 Index slipped 0.08%, while the Dow Jones Industrial Average also dipped 0.08%. The tech-heavy Nasdaq Composite gained 0.24%. The MSCI EAFE Index tracks developed overseas stock markets and rose 0.27% for the week through Thursday’s close.1
Source: Charles Schwab & Co., Inc
Nasdaq Regains Lead
Last week opened with the S&P 500 and Nasdaq heading lower, while the Dow rallied on momentum from the prior week. But by mid-week, the leadership shifted with the Nasdaq pushing higher.2
With the back half of the week packed with fresh economic data, conflicting stories developed about the economy. New home sales fell 11.3% in May — the largest month-over-month drop in a year and a half — while the supply of new homes hit a 16-year high. Meanwhile, first-quarter GDP revised slightly to 1.4% higher, and durable goods increased in May.3,4,5
Friday’s personal consumption and expenditure (PCE) data showed that core inflation slowed to 0.1% in May over the prior month and 2.6% year-over-year — its lowest annual rate in three years. Both figures were in line with expectations. Stock prices initially rallied on the upbeat inflation news, but the early gains faded as the trading day progressed.6
Source: Charles Schwab & Co., Inc
Divergent Speaker
Federal Reserve officials have worked to communicate that despite the progress made on inflation in recent months, it remains above the Fed’s 2% target.
Last week, Fed Governor Michelle Bowman surprised the markets when she indicated, “I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse.” Fed Chair Powell, who is scheduled to speak on July 2, told investors on May 14, “I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike.”7
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.
Author
Gary Aiken
Chief Investment Officer
Concord Asset Management
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Footnotes and Sources
1The Wall Street Journal, June 28, 2024
2The Wall Street Journal, June 28, 2024
3CNBC.com, June 27-28, 2024
4AP News, June 27, 2024
5Reuters, June 26, 2024
6CNBC.com, June 28, 2024
7CNBC.com, June 25, 2024
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