Weekly Market Commentary – 6/9/2023
-Darren Leavitt, CFA
The S&P 500 entered a new bull market, increasing 20% off the October lows. The move came with broader participation outside the mega-cap technology issues, responsible for most of the market’s performance this year. Cyclical sectors such as the financials, consumer discretionary, and industrials posted solid gains for the week. Global Central Banks surprised investors with the Bank of Australia and Bank of Canada raising their respective policy rates by 25 basis points. The US Federal Reserve is expected to pause its rate hikes at the June meeting, which concludes on Wednesday, while the European Central Bank is widely expected to raise its rate by 25 basis points. Markets will likely be standoffish in front of the Fed’s FOMC and then react to Chairman J Powell’s assessment of the economy in his post-meeting Q&A. Divergence in the opinions of Fed officials is likely and will foster uncertainly for the future path of Fed monetary policy. Currently, Fed Fund Futures’ price in a 29% probability of a 25 basis point hike at the June meeting and a 70% chance of a 25 basis point hike in July.
The week also saw former President Donald Trump charged with 38 criminal counts, including obstruction and the mishandling of classified documents, and the SEC announced that it is investigating cryptocurrency companies Binance and Coinbase. Tesla had a great week with the announcement that the company would collaborate with GM on charging technology.
The Economic calendar was limited to a handful of data sets. Initial claims increased by 28k to 261k, the highest level since last November. Interestingly, Continued Claims fell by 37k to 1.757 million showing again a very resilient labor market. ISM Non-Manufacturing showed that the services side of the economy is still expanding but at a slower pace. The ISM figure came in at 50.3, down from the prior reading of 51.9. This week, we will get May Consumer Price Index data and Retail Sales figures.
The S&P 500 gained 0.4%, the Dow increased by 0.3%, the NASDAQ added 0.1%, and the Russell 2000 advanced by 1.9%. US Treasuries sold off across the curve. The 2-year yield increased by eleven basis points to 4.62%, while the 10-year yield added six basis points to 3.75%. The US Treasury will auction off 40 billion in 3 years on Monday. Oil prices decreased by 1.8% or $1.35 to $70.30. Goldman Sachs lowered their price target for the third time this year based on increased supply and softening global demand. Gold prices increased by $7.30 to $1977.10 an OZ, as Copper prices increased by $0.06 to $3.78 an Lb.
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