On Hold
Chicken Little flew the coop as investors concluded that the sky was not actually falling following the passage of a debt ceiling bill that averted a U.S. default combined with the mounting evidence that future interest rate hikes are on hold. The next critical economic data will not come until mid-June on the 13th, when the Fed starts its June 2-day meeting.
The stock market closed out the holiday-shortened week on a particularly strong note with a powerful rally on Thursday afternoon and Friday. That rally took equities out of the red and into the green, with the S&P 500 finishing up 1.83%, the Nasdaq Composite gaining 2.04%, and the Russell 2000 spiking 3.3%. In addition to the debt ceiling bill, the May jobs report emboldened investors, as it showed U.S. employers added a seasonally adjusted 339,000 jobs in May while the number of unemployed increased by 440,000 signaling almost offsetting positives and negatives, a moderation in year-over-year average hourly earnings growth and a bump up in the unemployment rate to 3.7% from 3.4%. The combination of those numbers calmed recession fears while also making it painfully obvious that further rate hikes are not warranted.
The yield on the 10-year Treasury slipped 12 basis points to 3.69%, with the two-year note holding steady at 4.51%, resulting in an increase in the inversion to 82 basis points. The anticipated issuance of additional short-term Treasuries following the increase in the debt ceiling could be a contributing factor to the curve inversion, rather than the standard explanation of an impending recession.
The dollar, gold, and crude oil were all relatively unchanged. Advancing issues outnumbered declining issues by more than 4-1, and all equity sectors except Telecommunications enjoyed gains. The Telecom stocks suffered following the rumor that Amazon Inc (AMZN) was planning on offering free mobile phone service to U.S. Prime Members.
In the Chicago sports scene, the Sky isn’t falling, as our WNBA team snapped a 2-game losing streak over the weekend. Meanwhile, the White Sox are on a 3-game winning streak and play in the weakest division in MLB, so there is reason for hope on the South Side.
Clear Air
There are no market moving corporate earnings reports, economic data releases, Fed statements, or other government generated dramas expected. Given that clear air, perhaps we can relax and enjoy the French Open, NBA Finals, a day at the beach, or an outdoor music festival.
Energy sector traders need to stay vigilant in the wake of the OPEC meeting, as the cartel attempts to bolster prices with production cuts. The XLE (S&P Energy Sector ETF) is down approximately 8% in 2023, retreating from its strong performance in 2022, and the bounce in crude prices in the wake of the meeting was very modest.
Going forward, Stocks on the Move will be reported monthly.