Market Perspective for June 13, 2020

Equities consolidated recent gains this week after the Federal Reserve held interest rates steady. The Nasdaq declined 2.31 percent, the S&P 500 Index 4.81 percent and the Dow Jones Industrial Average 5.57 percent.

SPDR Technology (XLK) slid 2.03 percent this week, SPDR Communication Services (XLC) 2.52 percent and SPDR Consumer Staples (XLP) 3.81 percent.

The Federal Reserve held policy level this week. It did not announce a “yield curve control” policy. Some economists predicted the Fed might start a YCC policy to limit increases in long-term bond yields. Longer-term bond yields fell in the wake of the Fed’s meeting anyway. The 10-year bond fell to 0.70 percent on Friday, down from near 1.00 percent last Friday.

The National Federation of Independent Business released its small business confidence index for May. It climbed to 94.4, up from 90.9 in April.

Initial claims for unemployment fell to 1.54 million in the week ended June 6. This was down from 1.90 million the week prior. The Department of Labor estimates unemployment was 14.4 percent for the week ending May 30.

Consumer prices fell 0.1 percent in May. Both the headline and core CPI dipped by 0.1 percent. Producer price inflation was far stronger with an increase of 0.4 percent. That was a large reversal from the 1.3 percent drop in April.

Job openings fell to 5.0 million in April, down from 6.0 million in March as business curtailed hiring amid widespread state lockdowns.

Consumer sentiment was much stronger than expected in early June. Analysts expected an increased from 72.3 in May to 75, but sentiment popped to 78.9 as consumers are becoming increasingly optimistic.

Crude oil touched the $40 level this week but settled on Friday to $36.42 per barrel. SPDR Energy (XLE) fell 11.20 percent for the week.

The U.S. dollar saw its first rally in over two weeks. The U.S. Dollar Index gained 0.21 percent for the week. iShares MSCI Emerging Markets (EEM) declined 2.54 percent and iShares MSCI EAFE (EFA) 3.98 percent.

 

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