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Stocks retreated while oil popped
Stocks gave back some of last week’s strong gains as investors still wonder if the Fed will be able to normalize inflation rate without triggering a recession. The S&P was actually the week's biggest loser while Small Caps did better. Industrials and Consumer discretionary stocks outperformed. Volatility continued to moderate since its recent peak in mid-May despite warnings from JPMorgan's CEO that an economic “hurricane” was coming because of rising interest rates and elevated commodity prices. A report Friday that Elon Musk had emailed fellow executives that Tesla might have to lay off 10% of its workforce also seemed to unsettle investors somewhat. However, the week’s economic data did little to support worries of an impending recession. For instance, Friday job numbers showed that US employers added 390k nonfarm jobs in May, well above consensus expectations. Despite the signs of slowing inflation and speculation about a possible Fed pause, U.S. 10-year Treasury yield rose to 2.96% (versus 2.74% last week). European shares fell in thin volume as the UK market closed early to celebrate the Queen’s 70th year on the throne. Inflation in the 19 EU countries accelerated more than expected in May to another record high of 8.1%. In Asia, Japan’s Nikkei 225 was positive for the week while Chinese stocks rallied after Beijing unveiled a raft of support measures to cushion an economic slowdown. Oil prices exploded higher this week as OPEC+ didn't break up as so many hoped. Cryptos were volatile.
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US equities gave back a portion of the previous week’s gains, as uncertainty over the incoming administration’s policies appeared to continue driving the so-called Trump Trade. Financials and energy shares continue to benefit from hopes for deregulation and merger approvals. Likewise, the price of Bitcoin had surged by nearly a third since the eve of the election, as investors anticipated looser regulation of digital currencies. Conversely, health care shares fell sharply following news that Robert F. Kennedy, Jr., would be Trump’s nominee to head the Health and Human Services Department (HHS). On the macro side, yoy US headline inflation rose for the 1st time since March, from 2.4% to 2.6%. PPI data came in above expectations.