Wall Street surged to fresh highs last week, bouncing back decisively from the April sell-off as improving trade relations and easing Middle East tensions lifted investor sentiment. Both the S&P 500 and the NASDAQ reached new record levels, with gains driven largely by strength in information technology and financials. Meanwhile, energy and real estate sectors lagged. Despite slightly hotter inflation data, broader price pressures remain in check. Crude oil prices tumbled, logging their worst week since March 2023. Gold also declined for a second consecutive week as demand for safe havens faded. The dollar weakened again, touching its lowest level since early 2022. With slowing consumer spending, a contraction in first-quarter GDP, and softening inflation trends, the Federal Reserve may feel renewed pressure to cut rates in the coming months.
Last Week’s Economic News
- The third estimate of Q1 GDP showed a 0.5% contraction, reversing Q4’s 2.4% growth. The downturn was primarily due to a sharp rise in imports, a slowdown in consumer spending, and weaker government expenditures.
- Consumer spending rose just 0.5% in Q1, down from 4.0% in Q4.
- Personal income declined slightly in May. After-tax income fell 0.6%, while consumer spending dropped 0.1%.
- The PCE price index increased slightly in May.
- Year-over-year, PCE inflation was 2.3%, with core prices up 2.7%.
- The goods trade deficit $96.6 billion in May, up a bit April.
- Durable goods orders jumped 16.4% in May, rebounding from a 6.6% drop in April. Transportation equipment orderssurged 48.3%, driving the gain.
- New single-family home sales fell in May and are down 6.3% from a year ago.
- Existing-home sales rose 0.8% in May.
- Initial jobless claims fell by 10,000 to 236,000 for the week ending June 21. The insured unemployment rate held steady at 1.3%.
Eye on the Week Ahead
With the holiday-shortened week ahead, all eyes turn to the June jobs report. Hiring has been trending downward, with April and May delivering fewer-than-expected job additions. Markets will watch closely for signs of continued labor market cooling, which could influence the Fed’s next policy move.
Have a nice week!
Sincerely,
Robert G. Carpenter