Tech Stocks Slammed on AI Jitters; Bonds Gain
Good morning, and Happy 250th Birthday, USA!!,
The Dow (+0.6%), NASADAQ (-4.6%), S&P 500 (-1.9%), and EAFE (-1.3%) finished the week mixed, but mostly in negative territory. Conversely, taxable bonds gained 0.5% and tax-free municipal bonds gained 0.2%. The 10-year Treasury yield fell 0.08% to finish the week at 4.37%.
Last week represented one of the largest divergences in asset class performance than I’ve seen in a while. Technology stocks, particularly those associated with AI, got slaughtered, while “value” stocks such as healthcare and financials exhibited strong gains. The Magnificent 7 stocks lost between 2% and 9% for the week, and are now down 9% - 17% for the month of June. Conversely, healthcare stocks gained 8% last week, with 4 of the 5 biggest names gaining 10% - 17% for the week. The financial stocks also showed gains of 1% - 3% for the week. That divergence can be seen by the Dow gaining for the week, but the NASDAQ giving up large losses. Crude oil continued its descent, as oil prices fell nearly 10% to finish the week around $70 per barrel. This isn’t quite the pre-war levels of around $60, but far from the highs over $110 per barrel. We are beginning to see this reflected with prices at the pump falling below $4 per gallon in most states that don’t have high gasoline taxes. For those who don’t know, Pennsylvania has the 4th highest tax on gasoline, behind California, Illinois, and Washington.
In economic news last week, the Fed-favored inflation gauge, Personal Consumption Expenditures (PCE), rose 4.1% year over year, but pretty much in line with expectations. Durable goods orders and jobless claims were also fairly strong, suggesting that the US economy remains on strong footing. Higher inflation combined with strong fundamental economic data is a recipe for the Fed to hike interest rates. However, these elevated values were expected, and a drop in oil prices will likely result in inflation numbers easing lower. Thus, no need to panic now, as economists, investors, and the Fed will be looking more closely at the next few months of inflation data.
On behalf of the entire team at Menninger & Associates, we wish everyone a happy July 4th weekend. Please note that Friday is the official holiday, so our offices and the stock markets will be closed in observance of the holiday.
Source: Yahoo Finance
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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.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
