The S&P 500 (SPX) declined on the week, snapping a three-week winning run. The Dow Jones Industrial Average (DJIA) and the Nasdaq-100 (NDX) also logged small weekly losses, while the Nasdaq Composite (NDAQ) eked out a minute gain. Despite the turbulence, the benchmark indexes ended June with healthy increases and wrapped up a banner first half of the year.
Stocks ended lower on Friday as an early rally broke down under the weight of concerns regarding political uncertainty following the U.S. presidential debate. In addition, while the initial reaction to weaker-than-expected PCE inflation numbers was very positive, it became a non-issue later in the day. The Federal Reserve members have stressed numerous times that they need to see several months of consistently falling inflation before implementing an interest-rate reduction. Therefore, while the apparent slowdown in inflation is a very positive sign, the timing and the pace of monetary policy easing is still far from certain.
Meanwhile, economic data continues to send mixed clues. The revised Q1 2024 GDP came in slightly stronger than was expected, though still reflecting a significant slowdown from Q4. Consumer spending increased less than was expected in May, but personal income rose more than economists had previously estimated, propped by strong consumer sentiment that beat expectations in June.
Coupled with a deceleration in inflation, this data paints a picture of an economy headed for a “soft landing”, increasing the odds of an interest-rate cut coming in September. However, the picture is missing a key component that will be released this Friday: the all-important job market report, which also includes earnings growth data. Although consumers are feeling pressure from inflation and high interest rates, they will keep spending as long as their income is increasing. Therefore, some evidence of labor-market softening is needed to support September’s rate-cut expectations.
Four Economic Events
Here are four economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» June’s ISM Manufacturing PMI – Monday, 07/01 – This report shows business conditions in the U.S. manufacturing sector and serves as a significant indicator of the overall economic conditions. PMIs are considered one of the most reliable leading indicators for assessing the state of the U.S. economy, helping analysts and economists anticipate changing economic trends.
» June’s ISM Services PMI – Wednesday, 07/03 – This report shows business conditions in the U.S. services sector, which contributes over 70% of the U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» June’s Nonfarm Payrolls and Unemployment Rate – Friday, 07/05 – The Nonfarm Payrolls and Unemployment reports present the number of new jobs created during the previous month, along with the percentage of people actively seeking employment in the previous month. These reports are two of the most important economic indicators, as policymakers follow the shift in the number of positions since it is strongly associated with the overall health of the economy. One of the Federal Reserve mandates is full employment, and it considers labor market changes when determining its policy decisions.
» June’s Average Hourly Earnings – Friday, 07/05 – This data point serves as an important forward-looking indicator for overall price pressures stemming from wage inflation. The Federal Reserve pays close attention to labor costs and tightness of the job market, as they are connected to its dual mandates of price and labor-market stability.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
