Economic Reports Expected to Influence Stock Market Trends

Last week, the S&P 500 Index edged slightly higher by +0.03%, narrowly securing its fifth consecutive week of gains. Meanwhile, NVIDIA’s robust earnings report and optimistic outlook on artificial intelligence propelled the NASDAQ Composite to a gain of +1.4%, also marking its fifth straight week of positive returns. However, performance varied across major indices with the Dow Jones Industrial Average declining by 2.3% and the Russell 2000 Index dropping 1.2%. This downturn ended a five-week winning streak for the Dow. Overall trading activity was subdued, particularly ahead of the Memorial Day holiday.

Sector performance within the S&P 500 was mixed, with Information Technology (+3.4%) and Communication Services (+0.3%) posting gains, while Energy (-3.8%), Real Estate (-3.7%), and Financials (-2.0%) weighed on the broader index.

In the fixed income market, U.S. Treasury prices weakened across the yield curve, driven by stronger-than-expected preliminary readings on May services and manufacturing activities. Consequently, bond yields rose, reflecting investor uncertainty regarding the timing and extent of potential Federal Reserve rate adjustments amidst a resilient services sector.

Anthony Saglimbene, Chief Market Strategist at Ameriprise Financial, noted, “Under the surface, several stocks and sectors are still attractively priced based on their forward earnings expectations over the next twelve months.”

The U.S. Dollar Index ended the week slightly higher, contrasting with Gold’s decline of 3.3%, marking its worst performance of the year. Copper also saw significant losses, falling nearly +6.0% for its steepest weekly drop since November 2022, following a record high early in the week. West Texas Intermediate (WTI) crude finished down by nearly 5.0%.

Looking closer at the S&P 500, the index appeared to consolidate around 5,300, maintaining its position above this level for the second consecutive week. However, when factoring in Big Tech stocks, the index trades at historically elevated levels. Despite this, excluding Big Tech reveals a broader market with attractive forward price-to-earnings ratios across eight of eleven sectors.

Despite concentrated gains in a few mega-cap stocks, over two-thirds of S&P 500 constituents have seen positive returns in 2024, suggesting broad market momentum. NVIDIA’s earnings report last week underscored this trend, exceeding expectations and contributing significantly to market sentiment.

Economically, while there was optimism from strong services activity, concerns persisted over consumer inflation trends and economic data such as weaker-than-expected home sales and mixed jobless claims. Federal Reserve commentary continues to suggest a cautious approach towards interest rate policy adjustments.

Looking ahead, investors will closely monitor key economic reports, including Friday’s Personal Consumption Expenditures (PCE) Price Index, for insights into inflation trends and their potential impact on market direction. Consumer Confidence data on Tuesday will also be pivotal amid ongoing inflation concerns and consumer sentiment dynamics.

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