Weekly Market Recap: Record Highs, Fed Signals, and Economic Data Insights

Market Overview:

In a holiday-shortened week to start the second half of 2024, U.S. equity indexes hit new records. The S&P 500 reached an all-time high, surpassing 5,500 and gaining 1.8% for the week. The Nasdaq Composite also set new records, climbing 3.5%, while the Dow Jones Industrial Average rose 0.5%. Notably, technology and consumer discretionary sectors led the gains. Tesla (TSLA) surged over 25% following strong vehicle delivery estimates, and Amazon (AMZN) posted gains after announcing a $100 billion investment in AI and data centers. Despite softer economic data, dovish remarks from Federal Reserve Chair Jerome Powell buoyed market sentiment.

Internationally, European markets reacted to election outcomes, with relief rallies in France and a positive response in the U.K. to the Labour Party's parliamentary majority win. Asian markets were mostly higher, with Japan’s Nikkei rising above 40,000 and India's markets reaching new highs. However, Chinese benchmarks struggled, closing the week lower despite state interventions.

Federal Reserve Insights and Economic Roundup:

The Federal Reserve was in focus, with Chair Jerome Powell's dovish comments supporting rate cut hopes. Economic data showed a cooling labor market, with nonfarm payrolls growing by 206,000 in June and unemployment rising to 4.1%. Private payrolls growth was slower than expected, and the ISM services index fell into contraction. Despite these signs of economic slowdown, the bond market priced in two rate cuts for the year, starting in September.

In fixed income, Treasury yields fell, with the 10-year yield down over 0.10% and the 2-year yield down over 0.15%, maintaining an inverted yield curve. Commodities saw gains, with the Bloomberg Commodity Index up 1.7%, driven by rising crude oil prices and a significant drop in gold inventories. The dollar index edged lower, while the yen and euro showed mixed movements.

The Week Ahead:

Key economic data to watch in the upcoming week includes:

Monday: New York Fed 1-year Inflation Expectations (June), Consumer Credit (May)

Tuesday: NFIB Small Business Optimism (June), Fed Chair Powell's Senate Banking Testimony

Wednesday: MBA Mortgage Applications (July 5), Wholesale Trade Sales (May), Wholesale Inventories (May final), Fed Chair Powell's House Financial Testimony

Thursday: CPI (June), CPI ex Food and Energy (June), Real Average Hourly Earnings (June), Real Average Weekly Earnings (June), Initial Jobless Claims (July 6), Continuing Claims (June 29), Monthly Budget Statement (June)

Friday: PPI Final Demand (June), University of Michigan Sentiment report (June preliminary)

This data will be critical in assessing the economic outlook and potential Federal Reserve actions in the near term.