June 3 – June 7 Week in Review

After a stretch of poor performances the stock market last week had its best performance of 2019 on growing expectations the Fed will cut interest rates to mitigate slowing economic growth. The S&P 500 gained 4.4%, the Dow Jones Industrial Average rose 4.7%, the Nasdaq Composite advanced 3.9%, and the Russell 2000 was the laggard, up “only” 3.3%.

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All 11 S&P 500 sectors finished higher with gains ranging from 0.9% to 9.1%.

Coming into the week, the S&P 500 was down 6.7% from its record close, and many market participants had sensed that the market was due for a bounce from a short term oversold condition. The rebound effort was put on hold, though, as growing regulatory concerns surrounding Facebook, Apple, Amazon, and Alphabet sent these widely held stocks reeling on Monday.

Heavy losses from these FAANG stocks barely put a dent in the broader market, though, before the market quickly glommed onto the idea that the Fed will be forced to cut interest rates at least once this year. These stocks recouped most, if not all, of their losses from Monday over the course of the week.

Several Federal Reserve officials, including Fed Chair Powell, acknowledged concerns about trade tensions and persistently low inflation levels. Mr. Powell even said that the Fed will act as appropriate to sustain the economic expansion, which investors interpreted as a signal for looser monetary policy.

Deceleration in jobs growth and soft wage based inflation in the Labor Department's Employment Situation Report for May bolstered these rate cut expectations. The fed funds futures market sees an 85.6% implied likelihood of a rate cut at the July 30-31 FOMC meeting.

Adding fuel to the rate cut fire was the news that nonfarm payrolls increased by just 75,000 and average hourly earnings increased 0.2%. Year-over-year, average hourly earnings were up 3.1% versus 3.2% in April.

Separately, after President Trump surprised the market by announcing a 5% tariff rate on all imports from Mexico, the two sides reportedly made progress during the week. Market participants hoped that the U.S. could delay the planned tariffs from going into effect. In a not so surprising outcome it was announced over the weekend that the two sides had reached an agreement.

In the Treasury bond market growing expectations for an interest rate cut sent the fed funds sensitive 2 year yield down ten basis points to 1.84%. The 10 year yield declined six basis points to 2.08%.

In other markets the U.S. Dollar Index fell 1.2% to 96.58. WTI crude increased 0.8% to $53.92 a barrel.

June 10 – June 14 Economic Calendar

  • Monday
  • JOLTS
    10:00 AM ET
  • TD Ameritrade IMX
    12:30 PM ET
  • Tuesday
  • NFIB Small Business Optimism Index
    6:00 AM ET
  • PPI-FD
    8:30 AM ET
  • Redbook
    8:55 AM ET
  • Wednesday
  • MBA Mortgage Applications
    7:00 AM ET
  • CPI
    8:30 AM ET
  • Atlanta Fed Business Inflation Expectations
    10:00 AM ET
  • EIA Petroleum Status Report
    10:30 AM ET
  • Treasury Budget
    2:00 PM ET
  • Thursday
  • Jobless Claims
    8:30 AM ET
  • Import and Export Prices
    8:30 AM ET
  • EIA Natural Gas Report
    10:30 AM ET
  • Fed Balance Sheet
    4:30 PM ET
  • Money Supply
    4:30 PM ET
    • Friday
    • Retail Sales
      8:30 AM ET

       

    • Industrial Production
      9:15 AM ET
    • Business Inventories
      10:00 AM ET
    • Consumer Sentiment
      10:00 AM ET
    • Baker-Hughes Rig Count
      1:00 PM ET

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This commentary is a matter of opinion and is for informational purposes only. It is not intended as investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of Telemus Capital, LLC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.

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