Investors kept their cool amid more signs of rising inflation on Friday, which allowed the major indices to finish up one of the stronger weekly performances of the past few months. Along the way, the S&P had its second straight record close.
There was some déjà vu in this month’s personal consumption expenditures (PCE) index. It soared 3.4% in May for a second straight month with a jump over 3%. However, investors largely shrugged it off, which was also like the last print. The result was in-line with expectations, which seems to have been enough to pacify naturally nervous investors.
It feels like the market has gotten over the Fed announcement from June 16, which pulled stocks lower for that week. Investors appear willing to accept that the rising inflation is transitory… for now. We all know how quickly the mood can change.
The S&P rose 0.33% on Friday to a new high of 4280.70, while the Dow was up 0.69% (or about 237 points) to 34,433.84. These indices advanced 2.7% and 3.4%, respectively, over the past five days, which was a nice turnaround from the previous week’s losses of 1.9% and 3.6%.
The NASDAQ’s three-day run of record highs came to an end with a slight decline of 0.06% (or about 9 points) to 14,360.39. But the tech-heavy index was up 2.4% for the week as growth stocks have been back in favor of late.
Other positive factors helping the market along include the banks acing the Fed’s annual stress tests. The 23 institutions that took the exam all passed with flying colors, which puts an end to the pandemic-era restriction on stock buybacks and dividend increases. It’s also nice to know that these banks would stay on their feet in the event of a market crash or severe recession.
As a result the banks led the market on Friday, including Wells Fargo (NYSE:WFC, +2.7%), Bank of America (NYSE:BAC, +1.9%) and JPMorgan (NYSE:JPM, +1%).
And let’s not forget the infrastructure agreement that was announced yesterday between the White House and a bipartisan group of senators. We’ll be hearing a lot more about this in the days ahead, but it was a good headline for this week.
And just like that, we’re ready to put an end to another quarter next week. Stocks have solid gains for the three months heading into the homestretch with a lot to look forward to in the second half.
Today's Portfolio Highlights:
Value Investor: Beauty is a strong category coming out of the pandemic, which is exemplified by a company like NuSkin (NUS) recently rising to two-year highs. However, Wall Street is still ignoring this beauty and wellness company because of its “direct selling” past. But that is changing as we speak! The company is making a transition toward a social commerce business driven by social media, influencers and paid content. Case in point, NUS is building out its digital platform, which will launch in the second half. Tracey thinks this Zacks Rank #2 (Buy) is making the right moves for future success. Plus, the company recently reported record first-quarter results with expectations for earnings and revenue growth of 17.4% and 10%, respectively, this year. And of course, its value characteristics are low for this market. Read the complete commentary for a lot more on this new addition.
Counterstrike: "I wanted to share what to expect over the next three months. I think there are four things to watch as we hit the summer doldrums and close it out in September.
"The Fed and inflation- This is going to get annoying, but inflation and tapering headlines will be like China trade war headlines a few years ago. Watch out for Fed speak and the FOMC meeting to move markets if the tapering talk increases. Also, when we get econ data, the inflation numbers will be very important.
"Low volume and tight ranges- I get bored very easily, so low volume markets that are stuck in a tight range are torture for me. We all have to adjust when we recognize the slow price action and I expect this to continue into earnings season." -- Jeremy Mullin, who highlights two other things to watch next quarter in his complete commentary.
Have a Great Weekend!
Jim Giaquinto
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