Stocks pushed higher as advancing issuances outpaced decliners on the NYSE by a 2:1 ratio and on the NASDAQ 3:2. Investors chose to add risk, especially late in the week, encouraged by the much ballyhooed SpaceX (SPCX) Initial Public Offering (IPO) along with prospects for the end of the war with Iran. The latter of the two helped push both commodity prices and interest rates lower, adding to the bullish sentiment. Of particular note was the fact that the Russell 2000 (second and third largest thousand stocks domiciled in the United States) outpaced the large cap Standard & Poor’s 500 by a 6:1 margin and the equal weighted Exchange Traded Fund (ETF) INVESCO S&P 500 Equal Weight (RSP) outperformed the S&P 500 by more than 2:1.
· As noted above, Elon Musk’s SpaceX (SPCX) opened for trading on Friday. Bypassing the traditional price-range process, the company granted 30% of the shares to retail investors. Those who applied for and received shares, received a non-negotiable price of $135 per share. SPCX opened for trading just before noon at $150 per share, pushing as high as $176.52 during the afternoon before closing the day at $161.11. More than 522 million shares traded hands. That closing price makes the market capitalization of SpaceX approximately $2.1 trillion and Elon Musk the world’s first trillionaire. Due to the structure of the corporation, despite holding less than a majority of shares, Musk controls 85% of the total voting power. We shall see.
· Kevin Warsh will lead his first Federal Open Market Committee (FOMC) meeting June 16–17, 2026. Sworn into office on May 22, 2026, to succeed Jerome Powell, Warsh takes the helm amid significant political pressure regarding the central bank’s independence and loud calls from the White House for lower interest rates. Wall Street broadly expects the Fed to hold interest rates steady at this meeting. Analysts predict the central bank will likely remain on hold for the remainder of 2026. However, the true focus of this meeting will be Warsh's communication style. Observers are looking for a shift in the FOMC statement’s language to reflect a "two-sided risk" framework, escaping static economic models. Warsh, a native of Latham, faces a complex macroeconomic landscape. A recent reacceleration in inflation data and a strong nonfarm payrolls report clash with negative real wage growth and falling personal savings rates. Ongoing geopolitical tensions in the Middle East also present persistent supply-shock inflation risks. The meeting will provide onlookers their first glimpse into how Warsh intends to balance a strong economy with long-term price stability, the two mandates of the Fed.
· According to the Federal Home Loan Mortgage Corporation (Freddie Mac), “the 30 year fixed rate mortgage averaged 6.52% this week. Stronger employment momentum has helped existing home sales reach a five-month high. Importantly, homebuyers are looking past the short-term fluctuations and actively entering the market, signaling renewed confidence in homeownership opportunities.”
Economic Data That Drove Market Sentiment This Past Week…
· The University of Michigan reported that its Preliminary June Reading of Consumer Sentiment rose to 48.9 (-19.4% y/y) from a final May 44.8 and from a preliminary May reading of 48.2. The preliminary June expectations component jumped to 49.3 (11.8% y/y) from a final May 44.1 as well as from a preliminary May 48.5. Lastly, the preliminary June current conditions component rose to 48.4 ((-25.3% y/y) from a final May 45.8 and from a preliminary May 47.8. According to the Survey of Consumers Director, Joanne Hsu, “this measured improvement in sentiment was widespread, seen across age, education and political party. Lower-income consumers exhibited a particularly strong sentiment increase, consistent with the fact that gasoline comprises a larger share of their budgets.” (Source, Univ of Michigan)
· Prices at the wholesale level as measured by the Producer Price Index popped 1.1% during May, this after rising 1.1% in April. Over the past year the PPI has risen 6.5%, up from 6.0% in April. Energy prices jumped 10.7% during May (22.7% y/y) after rising 7.5% in April. Finished food prices rose 0.6% during May (2.2% y/y) after rising 0.6% in April. Excluding food, energy and trade, the core PPI rose 0.8% during May (5.1% y/y), after rising 0.5% in April. Prices for Intermediate Goods rose 3.5% during May (13.3% y/y) after rising 2.7% in April. (Source, U.S. Bureau of Labor Statistics)
· Inflation at the Retail Level as measured by the Consumer Price Index rose 0.5% during May (4.2% y/y), after rising 0 6% during April. The CPI has fallen from a y/y high of 9.1% during June 2022 but remains stubbornly elevated relative to the Fed’s 2.0% target. Energy prices rose 3.9% during May (23.5% y/y) after spiking 3.8% in April. Food at home prices rose 0.1% (2.7% y/y) during May after advancing 0.7% in April. The cost of shelter rose 0.3% during May (3.4% y/y), after rising 0.6% during April. Excluding food and energy, the core CPI rose 0.2%, after rising by 0.4% during April. Over the past year the core CPI has risen 2.9%, well below the September 2022 peak of 6.6%. (Source, U.S. Bureau of Labor Statistics)
· Sales of Existing Homes rose 3.2% (3.2% y/y) to a Seasonally Adjusted Annualized Rate (SAAR) of 4.17 million units during May from 4.04 million during April. According to the National Association of Realtors (NAR) total housing inventory at the end of May was 1.55 million units, up from 1.50 million units in April and by 0.6% y/y. Unsold inventory rose to 4.5 months, up from 4.2 months during April. The report also noted that the median price for all existing homes rose 2.8% (1.3% y/y) to $429,300 in May from $417,500. (Source, National Association of Realtors)
Economic Reports scheduled to be released this week, include the following – on Monday, May Industrial Production and Capacity Utilization; on Tuesday, May Housing Starts; on Wednesday, May Retail Sales and April Business Inventories; on Thursday, Initial Weekly Claims for Unemployment Benefits along with the May Index of Leading Economic Indicators (LEI).
Several potentially market moving companies are scheduled to report earnings, to include Dave & Busters (DAVE), Quantum (QMCO), La-Z-Boy (LZB), Smith & Wesson (SWBI), Jabil (JBL), CarMax (KMX), Accenture (ACN), and Kroger (KR).