June 7, 2019 Weekly Market Recap

June 7, 2019 Weekly Market Recap

The bulls went on a tear this week. The market had its best week in 2019, with the S&P 500 (+4.4%) and the Dow Jones Industrial Average (+4.7%) each rising over 4.0%, on expectations the Fed will cut rates to mitigate slowing growth. The Nasdaq Composite advanced 3.9%, and the Russell 2000 advanced 3.3%.

June 7, 2019 Weekly Market RecapAll 11 S&P 500 sectors finished higher with gains ranging from 0.9% (communication services) to 9.1% (materials).

Coming into the week, the S&P 500 was down 6.7% from its record close, and 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 regulatory concerns surrounding Facebook (FB), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOG) sent these widely-held stocks reeling on Monday.

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

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 the market 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 a 85.6% implied likelihood of a rate cut at the July 30-31 FOMC meeting.

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.

Growing expectations for a rate cut sent the fed funds-sensitive 2-yr yield down ten basis points to 1.84%. The 10-yr yield declined six basis points to 2.08%. The U.S. Dollar Index fell 1.2% to 96.58. WTI crude increased 0.8% to $53.92/bbl.

Separately, after President Trump surprised the market last week by announcing a 5% tariff rate on all imports from Mexico, the two sides reportedly made progress this week. Market participants hoped that the U.S. could delay the planned tariffs from going into effect on Monday.

Source: Briefing Investor

Mike Minter

Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).

 
Read Mike's Profile HereRead More Articles by Mike

This entry was posted in Blog, Investing, Market Commentary by Mike Minter. Bookmark the permalink.

About Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).  Read Mike's Profile HereRead More Articles by Mike