Market Performance Overview
The S&P 500 and Nasdaq Composite hit fresh record highs this week, closing 1.6% and 3.2% higher, respectively. Other major indices logged declines: the Dow Jones Industrial Average declined 0.5%, and the Russell 2000 fell 1.0%.
Influential Mega Cap Stocks
Gains in the mega cap space played a crucial role in the index-level gains for the S&P 500 and Nasdaq. The equal-weighted S&P 500 slid 0.5% this week. The Vanguard Mega Cap Growth ETF (MGK) jumped 3.4%.
- Apple (AAPL, Financial) was a significant winner, jumping 7.9% and hitting record highs after introducing "Apple Intelligence" at its Worldwide Developers Conference.
- Broadcom (AVGO) surged 23.4% following a better-than-expected earnings report, outlook, and a 10-for-1 stock split announcement.
- Adobe (ADBE) gained 12.9% this week after delivering pleasing earnings results and guidance.
Sector Performance
These three stocks helped propel the S&P 500 information technology sector to a 6.4% gain. The next best-performing sector was real estate, gaining 1.2%. On the flip side, the energy (-2.3%) and financial (-2.0%) sectors logged the biggest declines.
Market Rates and Bond Yields
The 10-year note yield declined 22 basis points this week, and the 2-year note yield declined 20 basis points to 4.69%. This was in response to this week's bond auctions:
- A soft $58 billion 3-year note sale
- A strong $39 billion 10-year note sale
- A solid $22 billion 30-year bond reopening
Inflation Data
The May Consumer Price Index (CPI) reflected some welcome disinflation:
- Total CPI: +3.3% year-over-year (prior +3.4%)
- Core CPI: +3.4% year-over-year (prior +3.6%)
The May Producer Price Index (PPI) showed a 0.2% month-over-month decline in total PPI, while core PPI was unchanged from the prior month.
Federal Reserve Actions
The Federal Open Market Committee (FOMC) left the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. The vote was unanimous. The directive reiterated that, "The Committee does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably toward 2 percent."
The Summary of Economic Projections (SEP) showed a median estimate of only one rate cut this year versus three at the time of the March projections. Fed Chair Powell's press conference featured a non-committal stance on the policy path.
Rate Cut Expectations
Rate cut expectations increased due to these events. The fed funds futures market is now pricing in a 70.2% probability of a 25 basis points rate cut at the September FOMC meeting, up from 50.5% one week ago, according to the CME FedWatch Tool.
Daily Market Summary
Monday
The stock market started the week with losses but ended on an upbeat note. The market showed resilience to early selling efforts, which turned into upside support. NVIDIA (NVDA) and Eli Lilly (LLY) were influential winners. Treasuries settled little changed from levels seen before the $58 billion 3-year note sale. There was no significant US economic data.
Tuesday
The S&P 500 (+0.3%) and Nasdaq Composite (+0.9%) climbed further into record territory. Apple (AAPL, Financial) hit a fresh record high after its product/AI presentation. Other mega cap stocks gained momentum, reacting to a drop in market rates. Treasuries responded to a strong $39 billion 10-year note sale. The NFIB Small Business Optimism survey rose to 90.5 in May from 89.7 in April. Paramount Global (PARA) settled sharply lower due to news about National Amusements and Skydance.
Wednesday
The stock market started in rally mode following positive inflation data. The May Consumer Price Index showed disinflation year-over-year. The FOMC left the fed funds rate unchanged, as expected. The SEP showed a median estimate of only one rate cut this year. The market vacillated after the policy directive and Fed Chair Powell's press conference. The S&P 500 (+0.9%) and Nasdaq Composite (+1.5%) settled further into record territory. The Dow Jones Industrial Average (-0.1%) settled slightly lower. Treasuries exhibited volatile action, ultimately settling with solid gains.
Key economic data:
- Weekly MBA Mortgage Applications Index: 15.6% (Prior -5.2%)
- May CPI: 0.0% (consensus 0.1%); Prior 0.3%
- May Core CPI: 0.2% (consensus 0.3%); Prior 0.3%
Thursday
The S&P 500 (+0.2%) and Nasdaq Composite (+0.3%) added to their record highs, but market breadth was negative. The Dow Jones Industrial Average fell 0.2%, and the Russell 2000 settled 0.9% lower. The underlying negative bias was driven by normal consolidation efforts. Treasuries responded to a cooler-than-expected May Producer Price Index, a weaker-than-expected initial jobless claims report, and solid demand for the $22 billion 30-year bond reopening. Broadcom (AVGO) was a standout performer.
Key economic data:
- Weekly Initial Claims: 242K (consensus 224K); Prior 229K
- Weekly Continuing Claims: 1.820 million; Prior revised to 1.790 million from 1.792 million
- May PPI: -0.2% (consensus 0.1%); Prior revised to 0.1% from 0.5%
- May Core PPI: 0.0% (consensus 0.3%); Prior 0.5%
Friday
Friday's trade featured a negative bias driven by normal consolidation activity after this week's record highs. The major indices closed little changed from Thursday. Gains in some mega cap stocks helped. Adobe (ADBE) was the top performer in the S&P 500, closing sharply higher. The overall downside bias was influenced by political uncertainty around the French election and growth concerns following a weak consumer sentiment report for June.
Key economic data:
Today's News
Boeing (BA, Financial) has informed its suppliers of a three-month delay in reaching a key production milestone for its 737 jet family. The new target of producing 42 jets per month has been pushed from June to September. This move comes as the company addresses regulatory scrutiny and supply constraints. Despite the news, Boeing shares remained relatively stable after a slight dip following reports of counterfeit titanium in some jets.
Pfizer (PFE, Financial) shares fell for the seventh consecutive day, closing at $27.53, marking a 0.43% decline. The stock has underperformed significantly, losing 31.63% over the past year. Analysts have mixed ratings for Pfizer, with a general consensus to hold, although some see potential for a rebound as headwinds for its commercial business start to dissipate.
Influential investor Cathie Wood and her Ark Invest fund have made a bold prediction for Tesla (TSLA), forecasting the stock to reach $2,600 per share by 2029. Wood's bullish scenario even suggests a potential high of $3,100 per share. This optimistic outlook implies a massive 1,500% increase from its current trading price of around $182.50.
U.S. regulators are investigating two incidents involving Southwest Airlines (LUV, Financial) flights on Boeing (BA, Financial) aircraft. One incident, involving a flight between Honolulu and Kauai, saw the plane descend dangerously close to the ocean surface due to an inexperienced first officer's error. An internal investigation is ongoing, and the findings could impact both companies.
Apple (AAPL, Financial) continues to be a focal point in the AI revolution. Steve Eisman of Neuberger Berman has highlighted Apple as a "hidden AI play," suggesting that the company's integration of AI into its devices could drive significant growth. Apple shares have seen a substantial rise, hitting record highs recently.
RTX Corporation (RTX, Financial) has also experienced a streak of losses, ending its seventh straight session in the red. Despite this, the stock has performed well year-to-date, with a 23% increase. Analysts remain divided, with a mix of buy and hold ratings, reflecting the company's strong profitability but weaker growth prospects.
Albemarle (ALB, Financial) shares have been on a downward trajectory, closing at $103.50, below its 52-week low. The stock has lost 54.4% over the past year, and analysts have given it a "Sell" rating, citing poor profitability and momentum.
Meta Platforms (META, Financial) and Apple (AAPL, Financial) are under scrutiny for potential violations of Europe's Digital Markets Act. Meta's ad-free versions of Facebook and Instagram could face charges, adding to the regulatory challenges both companies are facing.
Regeneron Pharmaceuticals (REGN, Financial) secured a preliminary injunction blocking Samsung Bioepis from launching a generic version of its eye drug Eylea. This follows a similar injunction against Mylan Pharmaceuticals, allowing Regeneron to maintain its market position.
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