Last Week
The University of Michigan’s Consumer Sentiment Index fell to a record low in May as surging gas prices and renewed inflationary pressures intensified affordability concerns. The peace negotiations showed little sign of progress, and government bond yields reached their highest levels since 2007. On the other hand, the latest weekly jobless claims numbers were low, while pending home sales posted a robust reading, and the outlook for second-quarter GDP growth is strong. The glass was half full for the stock market, with the S&P 500 gaining 0.9%, the Nasdaq Composite moving 0.5% higher, and the Russell 2000 surging 2.7%. The number of advancing issues nearly doubled that of declining issues, while only the Oil & Gas sector finished in the red. The yield on the 10-year Treasury peaked on Tuesday and then steadily declined, finishing unchanged at 4.58%. The S&P 500 has now extended its winning streak to eight weeks despite the volatile geopolitical backdrop.
Developments around U.S.-Iran negotiations and the outlook for oil prices dominated the headlines. The financial markets struggled early in the week as hopes of a “deal” faded, but sentiment improved midweek as a chorus of “Give Peace a Chance” was heard in the Oval Office.
NVIDIA reported results and guidance above expectations, though the stock finished lower in the session after earnings as investors turned their attention to quantum computing stocks following an announcement of significant government investment in the emerging technology.
The future course for monetary policy was also in focus as Kevin Warsh was sworn in as the new Federal Reserve chairman on Friday. Warsh sounded mildly hawkish in his comments, but the pressure will be on the Chairman to lower interest rates if the data provides an opportunity.
In last week’s commentary, we noted the pessimism amongst our North Side friends concerning the sustainability of the Cubs’ hot streak. Their concerns materialized as the Cubs lost 8 games in a row and dropped from first place down to third in the NL Central. The White Sox are still playing 500 ball, which is a dramatic improvement from past seasons. North Star’s Eric Kuby visited the Wintrust Arena over the weekend and saw the Lynx beat the Sky in WNBA action. The Sky (like the White Sox) are also much better than last year, but they still look like a middle-of-the-pack squad.
This Week
Developments in the war will continue to drive market action. Over the holiday weekend, there were tentative signs of progress in peace negotiations, though no formal agreement has been reached. Markets are opening higher following the weekend, supported by growing optimism that negotiations could ultimately lead to a successful resolution.
Investors will also be focused on inflation data, as the key economic report will be Thursday’s core PCE price index, which economists expect to show the core rate at an elevated 3.3%. There will be a heavy slate of Fed speakers throughout the week, including John Williams, Austan Goolsbee, and Neel Kashkari, adding to the confusion or perhaps clarity on monetary policy.
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