It was a relatively quiet week of consolidation as Fed head Powell janked the market’s chain with “wait and see” – as we know by now what the market wants, the market gets. It wants a rate cut – and come July it will be delivered or a massive selloff will ensue …..which will just mean the Fed will run in and cut rates anyhow. That said it was entertaining to watch the word smithing this week.
(Tuesday) Federal Reserve Chairman Jerome Powell, speaking at the Council on Foreign Relations in New York, said the Fed still in ‘wait-and-see’ mode on potential rate cuts.
(Tuesday) Wall Street currently has the odds of a rate cut in July at 100%, according to the CME Group’s FedWatch tool.
Economic news this week was not market moving but mostly poor…. which Wall Street wants. Bad news = Fed rate cuts = woo hoo.
The housing slowdown we’ve been pointing to for nearly a year has been evident in the data for a few months now. That continued this week:
U.S. home sales fell 7.8% in May versus April, even as median home prices have dipped compared with a year ago, new Commerce Department data showed.
As of this writing U.S. futures are up significantly ahead of Monday’s open as China and the U.S. agreed to not impose more tariffs on each other.
No market moving economic news.
For the month of June, the S&P 500 gained 6.9% (best June since 1955) and the NASDAQ 7.4%. Through 6 months the former is up 17.4% and the latter 21%!
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski.
The week ahead…
While we are being a bit tongue in cheek that the only thing that matters to markets is a flood of central bank money, that factor has dominated markets for a very long time. At one point in the future – near or distant – the market may implode despite a fire hose from central banks. But until we see it happen it’s been a loser’s bet to go against what central banks want.
Things are not cheap as it is – but if central banks are intent to inflate bubbles, it will happen….
The S&P 500 price-to-earnings — a popular way of valuing stocks — on a trailing 12-month basis is at 21.83, compared with a 10-year average of 17.87, according to Dow Jones Market Data.
Markets will be closed Thursday for Independence Day. Employment data hits Friday – remember markets want BAD news! 170K jobs is the current expectation after the horrid data the prior month. ISM Data hits Monday and Wednesday. The worse the better.
Short term: S&P 500 is still at old highs. Prior Federal Reserve heads must be completely dismayed by Powell – when they waved their magic wands, markets ran to new highs immediately. Cmon Jerome!
The Russell 2000 has been stuck in this range for a long time – other than a few months in latter 2018 and early 2019 it has been the laggard of the major indexes.
The NYSE McClellan Oscillator is back where bulls want it.
Long term: can’t complain.
Charts of interest / Big Movers:
Monday, Caesars Entertainment (CZR) jumped 14.5% after the casino operator agreed to be bought out by Eldorado Resorts Inc. in a deal that values the casino operator at $8.6 billion.
Tuesday, Allergan (AGN) soared almost 25% after AbbVie Inc aid it agreed to buy the pharmaceutical company in a deal valued at $63 billion.
Wednesday, Micron Technology (MU) soared as much as 14% after the company reported stronger-than-expected earnings.
Despite disappointing quarterly earnings results, shares of Rite Aid (RAD) surged 24% Thursday on news of a deal with Amazon that gave investors hope for a turnaround. Rite Aid’s stock had slid more than 8% in premarket trading before rebounding after the markets opened. The company announced a partnership with Amazon on Thursday, saying it would open Amazon pickup counters in 1,500 of Rite Aid’s stores by the end of the year.
Have a great week and we’ll see you back here Sunday!