U.S. equities lost steam late in the day to finish lower, but were able to notch another week of solid gains, as yesterday’s rally on increased optimism of rate cuts on the horizon following the Federal Reserve policy meeting was tempered by soft reads on manufacturing globally, as well as lingering tensions in the Middle East.
Treasury yields rebounded from a recent slide that took the 10-year note to levels not seen since late-2016, and the U.S. dollar fell, while gold added to yesterday’s rally, and crude oil prices were higher.
The Dow Jones Industrial Average shed 34 points (0.1%) to 26,720
The S&P 500 Index ticked 4 points (0.1%) lower to 2,951
The Nasdaq Composite fell 20 points (0.2%) to 8,032
In heavy volume as a result of quadruple-witching, 1.9 billion shares were traded on the NYSE and 2.8 billion shares changed hands on the Nasdaq
WTI crude oil advanced $0.36 to $57.43 per barrel and wholesale gasoline was up $0.06 at $1.82 per gallon
The Bloomberg gold spot price traded $11.92 higher to $1,400.36 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.5% to 96.16
Markets were solidly higher for the week, as the DJIA was up 2.4%, the S&P 500 Index increased 2.2%, and the Nasdaq Composite was 3.0% higher.
Existing home sales rebound
Existing-home sales rebounded in May, increasing 2.5% month-over-month to an annual rate of 5.34 million units, compared to the Bloomberg expectation of a rise to 5.27 million units and April’s upwardly-revised 5.21 million rate. Sales of single-family homes were higher m/m, but down from year-ago levels, while purchases of condominiums and co-ops rose compared to last month and were down y/y. The median existing-home price rose 4.8% from a year ago to $277,700, and marking the 87th straight month of y/y gains. Unsold inventory came in at a 4.3-months pace at the current sales rate, up from 4.2 months a year ago. Sales rose in all regions, with the Northeast seeing the largest increase.
Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 1.76%, while the yields on the 10-year note and the 30-year bond were up 6 basis points (bps) at 2.06% and 2.59%, respectively. Bonds yields bounced off recent declines, with the 10-year yield touching levels not seen since late-2016, that were exacerbated by Wednesday’s decision by the Federal Open Market Committee (FOMC) not to raise the target for the fed funds rate, while opening the door for the possibility of a near-term rate cut.
Europe and Asia mixed amid weak manufacturing data, geopolitical tension
European equities finished mixed, as increased anxiety over events surrounding the downing of a U.S. drone by Iran yesterday pressured sentiment after it was reported that President Trump authorized strikes against Iran and planes were in the air, but then called off the mission. Some soft economic data exacerbated the negative mood, as the Markit Composite PMI for the Eurozone rose to a seven-month high, courtesy of strength from the services sector, but manufacturing continued to struggle and be a drag on the index, with the component moving further in contraction territory and to a two-month low.
In other economic news, public sector net borrowing in the U.K. fell and was below estimates. The euro was higher versus the U.S. dollar, while the British pound lost ground versus the greenback amid some focus on political events in the nation after a final vote in the battle to become the Conservative Party’s leader and next Prime Minister brought the contest down to the final two candidates, with Brexit hardliner Boris Johnson continuing to garner the largest majority of votes. Bond yields in the region were higher.
Stocks in Asia were mixed following a rally yesterday on the global optimism that ensued following the Federal Reserve’s monetary policy meeting, as tensions in the Middle East continued to linger in the wake of events surrounding the downing of a U.S. drone by Iran. Hopes of a trade deal between the U.S. and China remained, giving mainland Chinese equities a boost, as U.S. Trade Representative Robert Lighthizer is set to meet with Chinese Vice Premier Liu He early next week, ahead of the scheduled meeting between President Trump and Chinese President Xi Jinping at the G-20 summit in Japan.
Japanese equities fell amid strength in the yen, which remains near a 6-month high against the U.S. dollar, and after a read on manufacturing activity fell further into contraction territory and to a three-month low, while department store sales declined and consumer price inflation was marginally softer.
Stocks post another weekly gain courtesy of the Fed
After beginning the week amid palpable caution with the Federal Open Market Committee’s monetary policy meeting looming, U.S. stocks finished the week with solid gains after the FOMC left rates unchanged, but made significant changes to its statement, most notably removing its “patience” language, fueling already-high hopes of rate cuts in the near future. Sentiment was further energized by increased trade deal optimism following a tweet from President Trump that he will meet with Chinese President Xi at next week’s G-20 summit.
Treasury yields continued their descent, further fueled to the downside following the Fed’s monetary policy meeting, with the 10-year yield touching levels not seen since late-2016, but were able to recover somewhat at the end of the week. The U.S. dollar also lost some ground, while crude oil prices jumped amid tensions in the Middle East after Iran shot down a U.S. drone and narrowly avoided strikes authorized by President Trump in the final minutes. All sectors saw gains for the week, led by energy, industrial and information technology stocks.
Next week’s economic calendar will offer a host of key reports, including Consumer Confidence, new home sales, pending home sales, durable goods orders, the final read on Gross Domestic Product, personal income and spending, regional manufacturing reports, and culminating with the final read on the June University of Michigan Consumer Sentiment Index. However, the lion’s share of attention may fall on the highly-anticipated meeting between President Donald Trump and Chinese President Xi Jinping at the G-20 summit in Osaka, Japan late in the week, with hopes of progress on a trade deal between the two nations running high.