Closing Comment — Friday, June 24, 2022
DJIA: 31,500.68, up 823.32
S&P 500: 3,911.74, up 116.01
Nasdaq: 11,607.62, up 375.43
S&P 500 logs best day since May 2020
U.S. stocks finished sharply higher on Friday, halting a three-week slide as Wall Street scaled back expectations for ultra-aggressive monetary policy tightening by the Federal Reserve (Fed). The S&P 500 jumped 3.1%, its sharpest single-session rally since May 2020, to cap a 6.5% weekly gain--its best showing in a month. The Nasdaq Composite soared 3.3%, bringing the tech-heavy index 7.5% higher for the week--its strongest performance since mid-March. The Dow climbed 823 points, notching a 5.4% increase since last Friday’s (June 17) close. Still, this marks only the second weekly advance for the major averages in the past 12.
On the data front, a final June reading from the University of Michigan showed its measure of consumer sentiment was downwardly revised to a record low, though longer-term inflation expectations eased from an initially reported 14-year high. The update added credence to the hope that price pressures and steep rate hikes could peak sooner than anticipated. Also aiding the mood, St. Louis Fed President Bullard, one of the central bank’s most hawkish members, suggested that recession worries were overblown as consumer balance sheets were healthy.
Treasuries weakened, with the yield on the 10-year note up four basis points (0.04%) to 3.13%, paring its weekly pullback to 10 basis points (0.10%). In commodities, West Texas Intermediate crude trimmed a second straight weekly decline, settling at $107.56/barrel.
All 11 S&P 500 sectors closed in positive territory, with cyclical and growth-related shares outpacing defensive groups. Cruise line operators were also among the standouts after Carnival Corp. offered upbeat commentary around bookings. In earnings, FedEx Corp. climbed 7.2% on better-than-expected guidance.
Midday Comment — Friday, June 24, 2022
DJIA: 31,329.45, up 652.09
S&P 500: 3,887.00, up 91.27
Nasdaq: 11,500.75, up 268.56
Stocks set to snap three-week losing streak
U.S. stocks are sharply higher near mid-session Friday as Wall Street scales back expectations for aggressive Federal Reserve (Fed) monetary policy tightening. The Dow is jumping 652 points, while the S&P 500 and Nasdaq Composite are both rallying 2.4%. All three major averages are set to snap a three-week losing streak, with the S&P 500 heading towards a 5.8% weekly advance.
A final June reading from the University of Michigan showed consumer sentiment was downwardly revised to an historic low, while longer-term inflation expectations eased from an initially reported 14-year high. Americans now anticipate inflation to rise 3.1% over the next five to ten years, easing from the preliminary 3.3% pace. Inflation over the next year is projected to still climb 5.3%, in-line with May’s survey. The decline in expectations offers credence that the current tightening cycle may peak sooner than expected, as Fed Chair Jerome Powell highlighted elevated inflation expectations following the decision to raise rates by 0.75% last week. Treasuries are declining, with the 10-year note yield up three basis points (0.03%) to 3.12%, paring its weekly pullback to 11 basis points (0.11%). In other data, new home sales unexpectedly jumped 10.7% in May following a 12.0% drop in April.
In earnings, FedEx Corp. is rising 7.4% after the company provided 2023 earnings guidance that was above expectations as the company stands to benefit from higher shipping prices and abating headwinds related to labor shortage. Breadth is positive on issues by 12:1 on the NYSE and 3:1 on the Nasdaq. Composite NYSE volume is greater than 2.2 billion shares.
Opening Comment — Friday, June 24, 2022
DJIA: 30,677.36, up 194.23
S&P 500: 3,795.73, up 35.84
Nasdaq: 11,232.19, up 179.11
Stocks set to extend weekly gains
U.S. futures are pointing to a higher open on Friday as Wall Street pares back expectations for aggressive Federal Reserve (Fed) policy tightening amid heightened worries of a recession. Disappointing data releases from earlier this week along with comments from Fed Chair Jerome Powell acknowledging the possibility of an economic downturn have led investors to price in a lower terminal rate for the current tightening cycle. Money markets are now projecting a peak rate of 3.4% by March 2023, down from the 4% rate being priced in just last week. This morning, the Dow is rising 0.6%, while the S&P 500 is up 0.7% in pre-market action. The Nasdaq 100 is trading 0.7% above fair value on the GLOBEX. Volatility should remain elevated during the session as the Russell benchmarks complete their annual index rebalancing. All three major averages are set to rise for the first time in four weeks, with the S&P 500 heading towards a more than 3% weekly advance. Still, the benchmark is poised to fall 8.1% this month with just five more trading days remaining in June, which would cap its worst first half of a year since 1970. The Nasdaq Composite is outperforming its peers this week, having climbed 4% week-to-date through Thursday’s session.
Yesterday, stocks ended firmly higher during a volatile session as investors weighed the risk of a looming recession. The S&P 500 climbed 1.0%, while the Nasdaq Composite rallied 1.6%. The Dow advanced 194 points. Treasuries also rallied, extending a recent reprieve in rising yields. The 10-year note yield fell six basis points (0.06%) to 3.09%, set to fall 14 basis points (0.14%) since last Friday (June 17). Additional comments from Fed Chair Jerome Powell were in focus during his second day of congressional testimony. Powell reiterated the Fed’s “unconditional” commitment to battling the highest inflation in over four decades, and noted officials would be hesitant to lower rates until there was clear evidence of easing price pressures. On Wednesday, the Fed chief acknowledged the risk of a recession as engineering a soft landing was proving to be “significantly more challenging,” and that policymakers would continue to make decisions on a meeting-by-meeting basis.
On the data front today, a final June reading (due at 10:00 a.m. ET) from the University of Michigan is expected to confirm consumer sentiment fell to a record low of 50.2. Separately, new home sales are projected to have dipped 0.2% in May after sliding 16.6% during the prior month. In central bank news, St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly are each slated to deliver remarks at separate engagements today. In earnings, FedEx Corp. (FDX) is rising 2.7% after the company provided 2023 earnings guidance that was above expectations as the company stands to benefit from higher shipping prices and abating headwinds related to labor shortage.