Weekend Update #235
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Equity markets entered this week with fear of expanded U.S. involvement in the Iran-Israel conflict. Tensions were high following the U.S. “Midnight Hammer” strikes on Iran’s key nuclear facilities and retaliatory missiles launched by Iran on U.S. military bases. Early on Monday, the U.S. accepted the de-escalatory nature of Iran’s retaliation, and a ceasefire brokered by the U.S. has held up throughout the week. Oil prices fell more than 12% this week as fears of a Strait of Hormuz closure or an expanded war were eased. To end the week, not all risks have been overcome relating to the conflict, as President Trump says he dropped plans to ease sanctions on Iran and investors look to talks scheduled for next week to see if Iran, Israel, and the U.S. can reach an agreement. On Friday, President Trump also stated that the U.S. was terminating trade discussions with Canada due to their digital services tax on U.S. tech companies, causing the S&P 500 to trim gains for the day. With progress made on the geopolitical front and steady underlying business activity, the S&P 500 ended this week at a new all-time high, surpassing the February 19th peak.
In economic news for the week, S&P Manufacturing PMI showed steady growth in June with a pick up in employment growth while Prices Paid accelerated to new highs since July 2022. Consumer Confidence in June posted a surprise decline as Americans perceived worse outlooks for business conditions and employment in the coming 6 months. New home sales dropped by the most since 2022 while the number of homes for sale rose to the highest since 2007 — signaling that affordability remains an issue for potential purchasers. Q1 GDP was revised lower to -0.5% from the prior -0.2%, as consumer spending on services fell to its lowest level since Q2 2020. Initial Jobless Claims for the week ended June 21 were 236,000, lower than economists’ estimates which is a positive during a period of labor market cooling. Personal Spending contracted in May, falling -0.1%, as Personal Income fell -0.4% and consumer budgets were under pressure. Core PCE grew 0.2% MoM and 2.7% YoY, hotter than consensus estimates, showing a slight stagflationary trend with prices rising as spending contracted. Consumer Sentiment showed that consumers’ views improved for the first time in 6 months in June, driven by progress on U.S. trade negotiations that lowered inflation expectations. Data also showed Federal student loan delinquencies increased to the highest on record as 5.8 million people, about one-third of borrowers, haven’t made payments in 90 days or more.
Key earnings results this week included Nike, which surged 15.3% on Friday as results showed that the company may be hitting an inflection point. Nike’s signal that underlying improvements could soon follow strategic decisions by CEO Elliott Hill, resetting inventory levels in lifestyle and refocusing on sports categories, caused other sportswear retailers Adidas, Puma, and JD Sports to gain in trading too. Micron Technology reported a beat on earnings expectations and upwardly revised guidance due to strong DRAM and high bandwidth memory demand. Despite the AI-driven strength, MU shares fell following earnings due to a risk of competition from Samsung and valuation concerns.
Friday’s Close (Weekly Performance)
S&P 500 6,173.07 (+3.44%)
Nasdaq 20,273.46 (+4.25%)
Dow Jones 43,819.27 (+3.82%)
Thank you Blue Room Senior Analyst JARED FENLEY.
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