Weekly Market Vibes

June 11, 2023

S&P 500 enters bull market

Stocks closed modestly higher in a week of relatively subdued trading ahead of the Federal Reserve’s policy meeting and rate announcement on the following Wednesday. The week was notable for the S&P 500 Index moving into bull market territory, or up more than 20% off its mid-October lows. It was also notable for broadening market gains, 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.

Several prominent investment conferences and events took place during the week, including the Paris Air Show and conferences on energy and consumer stocks, which seemed to drive sentiment. Apple’s annual developer’s conference also made headlines as the world’s most valuable public company unveiled its first major new product in several years, a virtual reality headset. Investors seemed to react negatively to the USD 3,500 price of the device, but the stock recovered some of its losses later in the week. Oil prices rose Monday morning after Saudi Arabia announced a unilateral production cut over the previous weekend but fell back to end the week lower.

Jobless claims hit highest level since October 2021

The week’s relatively light economic calendar seemed to support investor sentiment—if not necessarily hopes that the economy would avoid a recession. On Thursday, the Labor Department reported that weekly jobless claims had jumped to 261,000, well above expectations and the highest level since October 2021. Continuing claims fell back unexpectedly and hit their lowest level in nearly four months, however. An overall index of economic optimism published by Techno-Metrica Market Intelligence and Investor's Business Daily remained roughly steady, but the index’s gauge of Americans’ outlook for the next six months fell to its lowest level since November.

Data released on Tuesday showed a surprisingly large contraction in the services sector, but the silver lining for investors was evidence of a continuing decline in services prices, which have remained “sticky” in relation to moderating prices for goods, food, and energy. The Institute for Supply Management’s gauge of prices paid for services moderated to its lowest level since May 2020, while its gauge of overall activity in the services sector fell to 50.3, indicating virtually stalled growth (levels over 50 indicate expansion).

FDIC continues to offload munis

Longer-term Treasury yields rose modestly over the week, although some speculation mounted about how the market would accompany a flood of issuance of short-term bills now that the federal debt ceiling has been raised. The FDIC is liquidating the muni bonds it obtained after taking three large regional banks into receivership.

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