Market Insights

Stocks kept rising last week as one bearish narrative after another vanished.

The S&P 500 climbed 1.65 percent in the holiday-shortened period between Friday, June 28, and Friday, June 5. It was the fourth gain in the last five weeks and saw the index push above previous record highs.

Investors feared increased tariffs against China, then were forced to scramble as President Trump withdrew the threat. They also worried about a slowing economy, but then watched as key reports beat estimates:

• Monday: The Institute for Supply Management’s manufacturing index fell less than feared to 51.1. Trade remained a big concern, even as hiring and production increased.
• Wednesday: Initial jobless claims, a key forward-looking indicator, fell more than expected.
• Friday: Non-farm payrolls increased by 224,000, crushing estimates for 160,000 as more Americans re-entered the workforce. Meanwhile, neglected corners of manufacturing showed big gains.

Other data points like factory orders and private-sector payrolls missed estimates. But the takeaway was that few indicators are pointing to a recession any time soon. That may create a conundrum for Federal Reserve Chairman Jerome Powell when he appears in Congress this week. (See below for more.)

Technology Still Leading

Technology stocks including software makers and Internet companies led the charge as investors returned to prominent growth names. Solar, the year’s top-performing industry, rose more than 3 percent. Financial exchanges like Cboe (CBOE), Nasdaq (NDAQ) and CME (CME) continued their stealth rallies.

Airlines and real-estate investment trusts rose as well. Energy, 2019’s weakest major sector, was the main loser last week.

There were also some positive global stories. The iShares Brazil ETF (EWZ) rose 3.5 percent on signs that President Jair Bolsonaro may finally pass a key pension bill. Strong Macau gaming revenues also lifted casino operators like Wynn Resorts (WYNN).

Symantec (SYMC) was the S&P 500’s top gainer. The IT-security company surged 15 percent on reports it may be acquired by Broadcom (AVGO). Jefferies (JEF) followed with an 11 percent rally after quarterly results beat estimates. Did you know the lesser-known securities firm appears to be taking market share from major Wall Street players?

Cosmetics firm Coty (COTY), the only S&P 500 stock to double in the first half, led the index to the downside on news of an expensive restructuring. Electronic Arts (EA) had the second-biggest drop as sellers pushed video-game stock down from a resistance zone around $102.

Here Comes Powell

This week is dominated by the Fed with Powell scheduled to speak three days in a row.

Back on June 19, the central bank appeared to signal a rate cut would occur at the end of this month. Last week’s strong non-farm payrolls made some economists question that forecast, which raises the stakes for his speeches:

• Tuesday: Powell speaks 45 minutes before the opening bell in Boston.
• Wednesday & Thursday: Powell appears in the House of Representatives and Senate, starting both days at 10 a.m. ET.

Other events this week include oil inventories and minutes from the last Fed meeting on Wednesday. Initial jobless claims and consumer prices are due Thursday. Producer prices come on Friday.

PepsiCo (PEP) and Delta Air Lines (DAL) are the main quarterly reports tomorrow and Thursday, respectively. Next week marks the start of second-quarter earnings season.