Early Gains Reversed
Despite early gains, the US market closed mixed with the S&P 500 and Dow Jones Industrial Average both finishing slightly down. The S&P 500 lost 0.4% and the Dow fell by 0.1%.
This reversal came after the release of the PCE price index, which initially fueled optimism by showing easing inflation. However, other factors seemingly dampened investor sentiment later in the day.
Political Influence on Markets
The recent debate between Joe Biden and Donald Trump prompted investors to adjust their holdings. Biden’s performance was perceived as weak, leading some to believe Trump has a better chance of winning re-election.
This sparked a rise in stocks likely to benefit from a Trump presidency, such as those in private prisons and health insurance. Conversely, renewable energy and marijuana-related stocks fell. The yield curve also steepened following the debate.
Sector Spotlight: Nike Slumps While Tech Shows Strength
Sector-specific news also played a role. Nike’s stock price took a hit, falling 20% after missing revenue targets. Meanwhile, the tech sector provided some bright spots, with Zscaler leading the gainers on the Nasdaq.
Weekly Market Overview: A Mixed Bag
Overall, the market closed out the week with mixed results. While the Dow finished flat, the S&P 500 and Nasdaq managed small gains, reflecting a generally positive first half of 2024.
Friday’s Closing Levels:
| Index | Close | Change | % Change |
| DOW JONES | 39,118.86 | -45.20 | -0.12% |
| S&P 500 | 5,460.48 | -22.39 | -0.41% |
| NASDAQ | 17,732.60 | -126.08 | -0.71% |
| US 10Y | 4.396% | ||
| VIX | 12.44 | +0.20. | +1.63% |
Market Sentiment: Fed Rate Cuts on the Horizon?
Another positive quarter for the markets with new highs in sight. However, there are signs that this rally may be losing some steam.
One factor keeping buyers in the game is the expectation of a Fed rate cut. While only one or two cuts are expected, there is no doubt that the next move will be a cut.
This support is critical, even when the economy shows signs of weakness, threatening future company earnings. The market is supported by the “Fed put,” meaning the Fed will cut rates more aggressively if the employment situation weakens.
Labor Market Insights and Economic Indicators
The labor market, which has largely remained resilient, is showing some signs of softness. The Bloomberg consensus of economists is for an addition of 180,000 jobs in June, down from 272,000 in May.
There will also be volatility associated with the likely hood of a Trump presidency.
Chart-wise, the trend is still up, but a possible pullback, while maybe temporary may cause investors some concerns.
Half a year has gone, and profits are good if you were long. Profits may be enough for the whole year, so why not take profit and protect against any unnecessary losses?
What’s Next: Preparing for Market Fluctuations
While some might consider taking profits, FOMO is likely to keep most bulls in the game for even more profits. Time will tell.
JPMorgan Chase & Co.’s Marko Kolanovic predicts the S&P 500 will falter in coming months in the face of mounting headwinds, from a slowing economy to downward earnings revisions. He projects the gauge will plunge to 4,200 by year-end, a roughly 23% drop —a bold call and something to think about.
Source: CBOE, Bloomberg
This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable US bank exceeding 20 years.
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