Weekly Market Recap: S&P 500 Hits Record High, Tech Faces Rotation, Treasury Yields Fall
Market Overview
U.S. equities continued their upward trajectory, with the S&P 500 reaching its 35th record high at 5,600, marking a 0.9% weekly gain. The Nasdaq also hit new highs, closing the week up 0.25%. Despite early-week struggles, the Dow posted a 1.6% weekly gain. AI enthusiasm fueled gains, especially among semiconductor stocks, though on Thursday tech faced a significant rotation from the Mag 7 into the rest of the Market. Small caps and interest rate-sensitive stocks saw rotation on Thursday, with tame CPI data sparking hopes for rate cuts. The Russell 2000 index was up 6% on the week.
In Europe, markets rebounded from early losses, driven by cooling U.S. inflation and French election results, with the STOXX 600 rising 1.5%. UK GDP growth and inflation data from France and Spain also influenced market sentiment.
Asian markets mirrored Wall Street, with tech and semiconductor stocks leading gains. Taiwan, Japan, and India set new records, while South Korea reached multi-year highs. Despite a tech slump in the U.S., Asian markets ended the week higher, with China seeing choppy trading but securing weekly gains.
Federal Reserve Insights and Economic Roundup
Treasury yields fell as cooler-than-expected CPI data and dovish remarks from Fed Chair Jerome Powell bolstered rate cut hopes. The 10-year yield dropped by 0.13%. The bond market remained focused on Powell's testimony, where he emphasized the risks of both maintaining high rates and cutting them too soon.
Corporate credit spreads stayed near year-to-date tights, with investment grade bond spreads at 0.90%. The attractiveness of IG credit may wane if yields continue to fall, potentially widening spreads.
The Bloomberg Commodity Index declined nearly 1.5%, with crude oil down 0.7% due to higher Russian output and concerns over Chinese demand. The U.S. dollar index fell amid soft CPI data and declining consumer sentiment, while gold gained 1.0% on rate-cut bets. Grains, including corn and wheat, remained near 2024 lows.
June's headline CPI fell by 0.1% from the previous month, driven by lower energy prices, while services inflation also eased. Grocery prices continued to rise, impacting lower-income households, but airfare prices dropped by 5%. The labor market showed signs of weakening, supporting expectations for a rate cut in September.
The Week Ahead: Upcoming economic data includes
Monday: Empire State Manufacturing Survey (July)
Tuesday: New York Fed Services Business Activity (July), Retail Sales (June), Import and Export Price Indexes (June), Business Inventories (May), NAHB Housing Market Index (July)
Wednesday: MBA Mortgage Applications (July 12), Building Permits (June), Housing Starts (June), Industrial and Manufacturing Production (June), Capacity Utilization (June), Federal Reserve Beige Book release
Thursday: Initial Jobless Claims (July 13), Philadelphia Fed Business Outlook (July), Continuing Claims (July 6), Leading Index (June), Total Net TIC Flows (May), Net Long-Term TIC Flows (May)
Friday: Bloomberg July United States Economic Survey