Market Perspective for June 8, 2020

Equities extended their rally on Monday. The Dow Jones Industrial Average rallied 1.70 percent, the S&P 500 Index 1.20 percent and the Nasdaq 1.13 percent.

Heavily shorted sectors led the market. SPDR Energy (XLE) jumped 4.50 percent. Subsectors such as SPDR S&P Oil & Gas Exploration & Production (XOP), SPDR S&P Oil & Gas Equipment & Services (XES) and First Trust ISE Revere Natural Gas (FCG) popped 12.71 percent, 12.70 percent and 13.33 percent, respectively. Crude oil traded above $40 per barrel before settling back at $38 dollars and change. SPDR Utilities (XLU) gained 2.68 percent and SPDR Real Estate (XLRE) 2.19 percent.

May economic data starts flowing this week. Last week’s employment report showed the economy has rebounded quickly and more strongly than expected.

On Tuesday, the National Federation of Independent Business delivers its small business confidence index for May. In April, the survey slipped to a 90.9 reading.

Wednesday brings consumer price inflation. Economists forecast 0.0 percent growth in both headline and core inflation, up from negative 0.8 percent and negative 0.4 percent, respectively, in April.

The Federal Open Market Committee meets on Wednesday. Investors are speculating about the possibility for “curve control” from the Fed. If the Fed implements this policy, it would announce a target for longer-term interest rates and commit to buying as many bonds as possible to suppress rates. The 10-year Treasury yield jumped from 0.66 percent last week to near 1.00 percent last Friday before settling back at 0.88 percent on Monday.

Producer prices are out on Thursday. Economists predict prices increased 0.1 percent in May, up from negative 1.3 percent in April.

The week closes out with the University of Michigan’s advance consumer sentiment survey for June. Analysts forecast an increased from 72.3 in May to 75.0 in June.

Bonds were broadly higher on Monday amid falling credit risk and a breather in the interest rate rally. Invesco Senior Loan (BKLN) climbed 0.46 percent and iShares 20+ Year Treasury (TLT) rebounded 0.37 percent.

The U.S. Dollar Index extended its losing streak on Monday, sliding 0.27 percent. iShares MSCI EAFE (EFA) climbed 1.29 percent. iShares MSCI Emerging Markets (EEM) rose 0.68 percent.

 

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