Weekly Market Recap: Tech Gains, Inflation Insights, and Economic Forecasts

Market Overview:

U.S. stocks had a solid week, with the NASDAQ gaining over 3% and the S&P 500 up nearly 1.5%, while the Dow slipped by a little over 0.5%. Cooler-than-expected CPI and PPI data combined with dovish comments from the Fed buoyed markets. Technology was the top-performing sector, driven by strong performances from AI and semiconductor stocks. Apple shares rallied mid-week on news of a new generative AI offering. Broadcom and NVIDIA also saw gains, with Broadcom announcing a 10-for-1 stock split following NVIDIA's similar move. Real estate and communication services outperformed, while energy and financials lagged. European equities faced volatility due to political upheaval in France, which led to a sell-off in French stocks and volatility in Italy. Asian equities were mixed, with Chinese automakers impacted by EU EV tariffs.

Federal Reserve Insights and Economic Roundup:

U.S. Treasuries saw elevated volatility, but the Bloomberg Aggregate Bond Index ended higher. Soft CPI data mid-week led to a drop in yields, which offset the increase from the previous week’s strong jobs report. The Treasury Department's 3-year bond auction faced weak demand, but the 10-year and 30-year auctions were strong, suggesting investor confidence in locking in yields for longer periods. The broader commodities complex traded higher, with the Bloomberg Commodity Index up around 0.70%. WTI crude oil rebounded by 4%, and gold futures saw a 1% gain.

The monthly inflation report showed consumer prices were unchanged in May, pulling the annual rate down to 3.3%. Categories like gas, airfare, new cars, and clothing saw price declines. Restaurant prices continued to rise, indicating strong consumer demand. The FOMC’s revised forecasts showed a modest improvement in inflation, with the longer-run fed funds rate rising to 2.8%. Unemployment is projected to rise to 4.2% next year, while core inflation may not reach the 2% target until 2026. The PPI report indicated a significant drop in producer prices, driven by declines in food and energy prices.

The Week Ahead:

Key economic data for the upcoming week includes:

Monday: Empire Manufacturing (June)

Tuesday: NY Fed Services Business Activity (June), Retail Sales (May), Industrial Production (May), Capacity Utilization (May), Manufacturing Production (May), Business Inventories (April), TIC Flows (April)

Wednesday: Market Holiday (Juneteenth), MBA Mortgage Applications (June 14), NAHB Housing Market Index (June)

Thursday: Current Account Balance (Q1), Initial Jobless Claims (June 15), Continuing Claims (June 8), Housing Starts (May), Building Permits (May), Philadelphia Fed Business Outlook (June)

Friday: S&P Global U.S. Manufacturing PMI (June), S&P Global U.S. Services PMI (June), S&P Global U.S. Composite PMI (June), Leading Index (May), Existing Home Sales (May)