Summer Doldrums Arrive for S&P 500 Investors

Time for a pop quiz. What was the biggest market-moving headline from the past week?

BZZZ, time’s up! It’s a trick question because no news story moved the needle for the stock market during the past week. The S&P 500 (Index: SPX) closed out the week of trading at 5,460.48, down 0.08% from where it closed the previous Friday.

The lack of market moving news and change in the level of the index coincides with the early arrival of the summer doldrums for the U.S. stock market. This is the period after most companies have reported their earnings for the previous quarter, where we must now wait until the next quarter to find out what changes in outlook might alter the index’ trajectory by changing investor expectations.

The relative lack of action in the week’s trading can be seen in the latest update for the alternative futures chart, in which we find the level of stock prices falls to the low side of the trajectory associated with investors focusing on 2024-Q3.

2024-Q3 continues to hold the forward-looking focus of investors because of the anticipated timing of the Federal Reserve’s first rate cut in years. The CME Group’s FedWatch Tool anticipates the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3), the same as it forecast in the previous week. The tool anticipates the Fed will start a series of 0.25% rate cuts on that date, which will occur at 12 week intervals well into 2025.

Meanwhile, we weren’t kidding when we said it was a slow news week. Here’s what passed as market-moving news in the week that was.

Monday, 24 June 2024

• Signs and portents for the U.S. economy:

• Oil prices rise on fuel demand expectations, easing US dollar

• Rising US labor costs threaten to derail new LNG projects

Fed minions thinking about how to keep greasing U.S. housing market, would really like to see less inflation:

• Fed’s Mester: Mortgage bond sales should remain option for Fed
• Fed’s Goolsbee still looking for data inflation is cooling – CNBC
• Fed’s Daly: inflation not the only risk, policy must ‘exhibit care’

BOJ minions setting expectations for rate hike in July 2024:

• BOJ debated need for timely rate hike, signals chance of July action

Dow, S&P, and Nasdaq ended mixed as tech stocks suffered

• Nvidia slides for third straight session, loses $500B in market cap

Tuesday, 25 June 2024

• Signs and portents for the U.S. economy:

• Oil prices steady as inflation worries limit summer demand optimism
• Big US banks expected to be cautious on shareholder payouts

Fed minions say they want to hold interest rates steady “for some time”, claim will be time for rate cuts “at some point”:

• Fed’s Bowman: need steady policy rate ‘for some time’ to beat inflation
• Fed’s Cook: ‘At some point’ it will be time to cut interest rates

Bigger trouble developing in China:

• China’s retail outlook dims after mid-year shopping festival flop

BOJ minions get inflation data to support rate hike, still worried about risk of crashing yen:

• Japan’s business-to-business service inflation hits 2.5% in May

• Bank of Japan opens door for a hawkish double surprise

Japan to respond appropriately to excessive yen volatility, official says

Nasdaq, S&P snap three-day losing streak as Nvidia rebounds; Dow ends lower

Wednesday, 26 June 2024

• Signs and portents for the U.S. economy:

• U.S. crude imports touch two-year high despite lukewarm demand

• Oil edges higher on inventory drawdown outlook, Middle East risks

US new home sales slump; supply at more than 16-year high

US banks suffer steeper losses, but retain large cushions in annual Fed health check

Fed minions really wanting to believe holding interest rates steady will cause inflation rate to fall:

• Fed’s Bowman: inflation will decline with policy rate held steady

Bigger trouble developing in Japan:

• Sharp Japan GDP downgrade possible, affecting monetary policy, analysts say
• Yen slumps to lowest since 1986, putting traders on red alert

Wall Street ends slightly up, trade choppy ahead of inflation data

• Amazon hits $2 trillion in valuation on AI fervor, rate cut bets
• The S&P 500 is the ‘perfectly constructed index’ – Goldman Sachs

Thursday, 27 June 2024

• Signs and portents for the U.S. economy:

• Oil settles $1 up, war risk premium outweighs ample US stocks
• US weekly jobless claims, equipment spending data point to slowing economy
• Car affordability affecting auto lending market, study shows

Fed minions say no rate cuts until inflation slows, see rate cut in 2024-Q4:

• Fed’s Bowman: not ready to cut rates until clearer inflation is ebbing
• Fed’s Bostic says inflation moving in ‘right direction,’ sees one Q4 rate cut

ECB minions told they should keep cutting Eurozone interest rates:

• You can continue to cut rates, researchers tell ECB

Wall Street closes subdued as investors sit, wait for inflation data

Friday, 28 June 2024

• Signs and portents for the U.S. economy:

• Oil prices to stay steady as China demand woes offset Mideast risks
• US inflation cools in May; consumer spending rises moderately

Fed minions get inflation data they want, say they’ll sit on their hands for the time being:

• Fed gets heartening inflation data, but slow road ahead
• Fed’s Barkin says he’ll ‘proceed deliberately’ on policy

• Fed’s Barkin: consumer demand solid, but not frothy

New York Fed says reverse repo inflows hit highest level since start of year

BOJ minions get more inflation data to support rate hike:

• Inflation in Japan’s capital accelerates, keeps BOJ rate hike prospects alive

ECB minions claim to have analytical superpowers:

• ECB’s Villeroy: confident we can look through data noise

Wall Street ends lower as investors digest inflation data, presidential debate

• S&P 500′s stellar H1 sputters in the homestretch amid concerns over breadth, valuation

The Atlanta Fed’s GDPNow tool‘s forecast of annualized real GDP growth rate during 2024-Q2 dropped to +2.2%, falling from the +3.1% growth projected a week earlier.

When it comes to market moving news, this upcoming week may be even slower than the trading week ending on Friday, 28 June 2024 given the timing of the Fourth of July market holiday in the United States. We’ll all find out if that hypothesis holds soon enough….

Image credit: Microsoft Copilot Designer. Prompt: “A Wall Street bull and bear looking out at a calm sea with no wind or waves from a ship”.