Consumer spending, inflation, and housing are 3 things to watch in the market
Wall Street advanced during this holiday-shortened trading week, with the S & P 500 and Nasdaq both reaching new all-time highs in the first half of the week before pulling back some. The S & P 500 and Nasdaq were able to finish the week slightly higher. The Dow , which had recently come off the boil, was the big weekly winner. Nvidia was the big story of the week, surging to all-time highs Tuesday and overtaking Microsoft as the most valuable company in the U.S. But sharp back-to-back losses Thursday and Friday put Nvidia in the third position as Club name Microsoft regained the top spot, followed by Apple . Nvidia had some strong moves in the days after its 10-for-1 stock split traded in the market on June 10. That strength looked like it was going to continue this past week, profit-takers came in. In fact, the market backed away from the AI trade on Thursday and Friday. We wanted to make sure we didn’t give back gains in our other portfolio chip giant Broadcom , so we sold some shares Tuesday. Despite its three-session losing streak, including Friday, Broadcom was still up some 13% since the session before this month’s blowout earnings. The S & P 500 information technology sector was flat on the week, reflecting that AI trade flip flop. Energy was the top performer as U.S. oil prices surged. West Texas Intermediate crude had its best week since early April. Consumer discretionary, industrials, and financials were also stronger. Utilities and real estate were the only two sectors to close lower on the week. This past week also featured some key economic reports. Tuesday brought weaker-than-expected May retail sales , which the stock market took in stride, perhaps on the view that softness helps the view that the Federal Reserve will indeed cut interest rates later this year. Stronger-than-expected May industrial production and capacity utilization, also from Tuesday, indicated that even if the consumer is pulling back a bit, the economy is still holding in. The markets were closed Wednesday for Juneteenth. Housing data to finish the week was mixed, with May housing starts on Thursday a bit weak and May existing home sales on Friday slightly better than expected. Ultimately, the economic readings this past week signal that while U.S. growth remains resilient, things are slowing, which is an ideal setup for stock market bulls. Continued economic expansion along with lower rates, which is what we expect to get should inflation continue to cool off, is a recipe for higher equity prices. The Fed’s favorite inflation gauge and the tail end of earning season will be drivers of the market in the week ahead. Economy The most important number next week will be the core personal consumption expenditures (PCE) price index — the preferred inflation measure of central bankers. It’s out on Friday. The consensus May estimate, per FactSet, calls for an annual increase of 2.6% on both headline PCE and the core rate, which excludes often-volatile food and energy prices. Those numbers would be pretty much in line with the year-over-year increases seen in each month since the beginning of 2024. The day before the PCE data, the final read on first-quarter gross domestic product is out. While it is the highest-level look at the U.S. economy, we must be mindful that GDP is extremely delayed. After all, we’re already at the end of the second quarter. Fresh housing data comes out on Tuesday, Wednesday, and Thursday. Since shelter costs are the largest single component of the inflation basket of prices, we can use these reports to get a sense of where home prices are headed and therefore inflation more broadly. Earnings While no Club companies are reporting in the week ahead, there are notable earnings from outside the portfolio to consider. FedEx : The delivery company’s extreme reach and importance to so many industries puts management in a unique position to provide higher-level thoughts on economic activity. It can also provide insight into consumer online shopping activity since it delivers a lot of those packages. If consumer and economy activity more broadly are indeed holding in, we should see that expressed in shipping volume dynamics. Carnival , Levi Strauss , Nike : Among these three companies, we can get a better sense of consumer spending activity and where they are focusing on their dollars. Are they still focusing on experiences (Carnival) or are we seeing some spending swing back in favor of goods (Nike and Levi Strauss)? Paychex : The company is one of the nation’s largest payroll processors, with a focus on small- and medium-sized businesses. It’s uniquely positioned to provide insight into the state of the labor market. The U.S. has a consumption-driven economy, so low unemployment speaks to sustained buying power. That’s key to the Fed being able to wage its war on inflation while at the same time, hopefully, avoiding a recession. Micron : We’ll take as much insight into the data center and the state of the AI data center buildouts as we can get. Though Micron may not be as direct a play on AI as Nvidia or Broadcom, its memory chips are still needed to build out these data centers. What Micron management is seeing can help us better understand where we are in the current investment cycle and how much room there is left to run. We expect that there are still several quarters left to go before we see any waning in demand for data center infrastructure solutions. Micron can also provide insight into the personal computer and smartphone markets, which will better inform us on Apple , Broadcom’s wireless business (which is pretty much all Apple), and the state of the consumer electronics refresh cycle, which is key to our Best Buy investment thesis. Monday, June 24 No major events Tuesday, June 25 Before the bell: Carnival (CCL) After the bell: FedEx (FDX) Wednesday, June 26 10 a.m. ET: New Home Sales Before the bell: General Mills (GIS), Paychex (PAYX), UniFirst (UNF) After the bell: Micron (MU), BlackBerry (BB), Levi Strauss (LEVI) Thursday, June 27 8:30 a.m. ET: Initial Jobless Claims 8:30 a.m. ET: Gross Domestic Product 10:00 a.m. ET: Pending Home Sales Before the bell: Walgreens Boots Alliance (WBA), McCormick (MKC) After the bell: Nike (NKE), American Outdoor Brands (AOUT) Friday, June 28 8:30 a.m. ET: PCE Price Index (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Shoppers walk around Twelve Oaks Mall on November 24, 2023 in Novi, Michigan.
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Wall Street advanced during this holiday-shortened trading week, with the S&P 500 and Nasdaq both reaching new all-time highs in the first half of the week before pulling back some. The S&P 500 and Nasdaq were able to finish the week slightly higher. The Dow, which had recently come off the boil, was the big weekly winner.
