Stocks, Bonds & Gold soar as inflation cools down. US stocks recorded strong weekly gains as investors welcomed data showing a continued cooldown in inflation. The S&P 500 Index ended the week 6.5% below the all-time intraday high it established in early 2022. The Nasdaq Composite recorded an even stronger gain but remained 12.9% below its record peak. Both US headline and core inflation rose 0.2% in June, a tick below expectations.

Strong US labor market keeps the Fed on high alert After a strong first half in 2023, equity markets retreated as we entered the first week of the third quarter. The S&P 500 was down -1.2% last week, while small-cap stocks underperformed large-cap equities. Growth stocks held up modestly better than value shares. The key driver for this market disruption was stronger-than-expected labor market and services data, as well as Wednesday’s release of (hawkish) minutes from the Federal Reserve’s last policy meeting.

CHART OF THE WEEK: WILL “SOFT MACRO DATA” CLOSE THE GAP?

The major US equity benchmarks closed lower in a holiday-shortened trading week. The Nasdaq suffered its first weekly decline in two months, while the S&P 500 Index recorded its first drop in six weeks. Growth stocks outperformed value shares, while large-caps fared better than small-caps. Signs that further Federal Reserve rate hikes lay ahead seemed to weigh on sentiment for much of the week.

US main equity index continues a rally that began with only a few interruptions in late May. The S&P 500 Index notched its longest stretch of daily gains since November 2021 and its best weekly performance since the end of March. Indeed, several signs emerged that the economy is enjoying a “Goldilocks” expansion of continued growth alongside falling inflation.

The S&P 500 enters bull market Stocks closed the week modestly higher as the S&P 500 Index moved into bull market territory, or up more than 20% off its mid-October lows. Market advance is broadening, with small-caps outperforming large-caps, and value shares outperforming growth stocks. An equally weighted S&P 500 Index also rose more than its capitalization-weighted counterpart for the first time in eight weeks and by the largest margin since late March.

The major US equity indices recorded solid gains for the week, with the S&P 500 Index touching its highest intraday level since mid-August 2022. The tech-heavy Nasdaq index notched its sixth consecutive weekly gain and hit its best level since mid-April 2022. In contrast with the past several weeks, however, the rally was broad-based, with strong gains in both value and growth stocks, as well as small-caps.

The Tech-heavy Nasdaq Composite index is up 24% year-to-date — a stark contrast to the 0.16% decline of the narrowly focused Dow Jones Industrial Average over the period. Alongside the debt ceiling negotiations, the signal event in the week may have been Thursday’s 24% jump in the shares in chipmaker NVIDIA, which took the company’s market capitalization to nearly USD 1 trillion, the sixth most highest market cap in the world.

US stocks recorded solid gains for the week, with the S&P 500 Index breaching the 4,200 level in intraday trading for the first time since late August. The market’s advance remained notably narrow, however. The equal-weighted S&P 500 Index is up only 0.93% year-to-date, which is 825 basis points behind the weighted index.

The major US equity indexes ended mixed for the week as Q1 earnings season neared its end. The Nasdaq outperformed, helped by a surge in Alphabet following the unveiling of its new AI-based search platform. The Dow Jones lagged, weighed down by Disney. Financials stocks underperformed, dragged lower by ongoing concerns over the strains facing certain regional banks.