- U.S. equities finished positive for the week: Last week, the Dow Jones Industrial Average (Dow) gained 681 points, or rose 2.77%, to 25,317. The Standard & Poor’s (S&P500) index gained 44 points, or rose 1.62%, to 2,779. The Nasdaq closed 1.21% higher at 7,646, while the 10-year Treasury ended the week at 2.95%.
- Macro Update: Although the list of investor concerns (yield curve, peak earnings growth, trade war, and Europe, among others) continues to grow, the list of data points supporting strong economic fundamentals also continues to grow. Last week, the Institute for Supply Management (ISM) reported economic activity in the U.S. non-manufacturing sector expanded for the 100th consecutive month during May. The index came in at 58.6, above consensus expectations of 57.7 (An index level above 50 represents an expansion, while below 50 represents a contraction). The strong May index level shows an acceleration in the services sector and is yet another data point to support the current strength of the U.S. economy.
The earnings calendar will be relatively slow this week with reports from Adobe Systems, H&R Block, and Dave & Busters, among others and a handful of brokerage conferences including Goldman Sachs Global Healthcare, William Blair Growth Conference, and the Credit Suisse Basic Materials Conference, among others.
The upcoming week will be very busy with a number of closely watched macro updates.
- Monday night (9pm ET), the historic Trump/Kim Summit will take place in Singapore.
- Tuesday, there will be a ruling for the AT&T-Time Warner case, which investors will be closely watching as a signal for the M&A landscape going forward. Currently, the consensus expectation among investors is for an approval. U.S. Consumer Price Index (CPI) will also be released, with expectations for +2.5%, in line with the previous month.
- Wednesday, the Federal Open Market Committee (FOMC) will issue its next policy decision, including a new dot plot. Current expectations are for a quarter point (0.25%) rate hike, bringing real rates to 0% for the first time in more than a decade. Investors will also be closely watching Fed Chair Jerome Powell’s language.
- Thursday, the European Central Bank (ECB) will follow with its policy decision as well with investors expecting more color on the tapering plans as well as the situation in Italy. U.S. retail sales data and Chinese economic data will also be released.
- Friday, The Bank of Japan will end the Central Bank streak with its own policy decision.