Markets delivered mixed results last week as traders weighed rising geopolitical tensions against diverging signals from the Federal Reserve. The Dow, NASDAQ, and Russell 2000 posted modest gains, while the S&P 500 and the Global Dow edged lower. Only two sectors—information technology and energy—finished higher, while health care stocks fell sharply. Oil prices rose for the third straight week, driven by concerns over Middle East supply disruptions despite Iran’s continued crude exports. Meanwhile, gold prices slipped for the first time in three weeks. Long-term bond yields dipped as investor demand for safe-haven assets pushed bond prices higher.
Last Week’s Economic News
- The Federal Reserve held interest rates steady at 4.25%–4.50%, citing solid economic growth, steady labor conditions, and elevated inflation. The Fed’s updated projections show two rate cuts of 25 basis points likely by year-end, with the next meeting scheduled for July 30.
- Retail sales dropped 0.9% in May but remained 3.3% higher than a year ago. Online sales rose 0.9% in May and 8.3% year-over-year. Restaurant and bar sales fell 0.9% for the month but were still up 5.3% annually.
- Import prices were flat in May, with a notable 4.0% drop in fuel costs offsetting gains in nonfuel imports. Export prices fell 0.9%, their sharpest drop since October 2023, though still 1.7% higher than a year ago.
- Industrial production declined 0.2% in May. While motor vehicle output rose 4.9%, broader manufacturing was down 0.3%. Utility output fell 2.9%, and total industrial production was just 0.6% higher than May 2024.
- Housing activity slowed significantly. Building permits and housing starts both fell, with starts dropping nearly 10% from April, the lowest level since May 2020. However, single-family completions increased 8.1% from April.
- Gasoline prices averaged $3.139 per gallon nationally, nearly $0.30 lower than a year ago.
- Initial jobless claims dipped to 245,000 for the week ending June 14. Continuing claims fell slightly to 1.945 million, though the insured unemployment rate held steady at 1.3%.
Eye on the Week Ahead
This week brings a wave of economic indicators that could influence the market outlook. New and existing home sales data will provide insight into housing market trends. Midweek, the final estimate of Q1 GDP is due. By Friday, markets will digest updated readings on personal income, consumer spending, and inflation, key data points as investors look for clarity on future Fed policy moves.
Have a nice week!
Sincerely,
Robert G. Carpenter