Tech Stocks Rally on Mixed Economic Data; Bonds Also Gain

Good morning!

The Dow (+0.3%), NASDAQ (+2.4%) and S&P 500 (+1.4%) each gained for the week.  Meanwhile, taxable bonds gained about 0.4% and tax-free municipal bonds reversed their recent slide by surging 1%.  The 10-year Treasury yield fell 0.06% to end the week at 4.43%.

The Institute of Supply Management (ISM) manufacturing and services sectors showed mixed results last week, with manufacturing falling slightly, but the much larger services sector showing gains that exceeded analyst expectations.  The May jobs report published on Friday showed that the economy added 272,000 jobs in May, well above consensus estimates of 190,000 jobs.  This data demonstrates that the US economy, while weakening slightly, continues to demonstrate resilience to the higher interest rates.

It’s virtually impossible to discuss the stock market without mentioning its recent darling, Nvidia Corporation.  Nvidia has gained 144% YTD and 223% over the past year.  That stock has now eclipsed the $3 trillion market cap, held only by Apple and Microsoft.  Those three stocks now represent over 24% of the NASDAQ and a record 20% of the S&P 500, so it can easily be seen how these stocks have made such an impact on those market indices.  Nvidia is also undergoing a 10:1 stock split today, as its stock price recently exceed $1,000.  We aren’t recommending this stock, but only demonstrating how much one or a few stocks can have such an impact on market indices, as Nvidia’s recent gain represents 20% of the S&P 500 gain.

This week can be expected to be volatile, as three important inflation-related events will occur.  First, the Consumer Price Index (CPI) will be released on Wednesday and the Producer Price Index (PPI) on Thursday.  More importantly, the Fed holds its meeting this week, and will likely announce that it will NOT be raising or lowering interest rates.  However, this meeting exhibits the “dot plot” which conveys the expectation of each Fed member’s estimate of future rate hikes and cuts.  Thus, pundits will be paying close attention to that release on Wednesday afternoon.

Have a great day and terrific week!

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}