Summer Stall?
The S&P500 has now regained more than +20% from its October 2022 lows as of last Thursday. For many armchair strategists, including the cover of Barron’s this weekend, this marks the start of a fresh bull market. The OHFG investment team doesn’t play that game by those rules.
Global equity markets were mixed last week, with the S&P500 (+0.4%), led by consumer discretionary stocks, and the Japan Nikkei (+2.4%) the top performers in the world. U.S. stocks finished higher for the 4th straight week, and the Nasdaq composite rose for the 7thstraight week. Following the 5.6x breadth thrust on June 2nd, and against the backdrop of continued bearish market calls by many, the rally in stocks broadened out with the Russell 2000, small and mid-cap stocks, and cyclicals rallying for the first time since early spring. The uptrend in stocks has pushed the S&P 500 over 4300 finally, to a fresh 1-year high and its P/E ratio near 19x. As OHFG had expected, volatility continued its downtrend with the often quoted, but non-predictive, spot VIX Index falling below 14 for the first time since before Covid.
On Wednesday, the Federal Reserve is expected to pause for the first time following 10 straight interest rate hikes. A few Fed members have asserted that a pause in the hiking cycle shouldn’t be viewed as an end to rate increases. While inflation has slowed over the last 9 months, it remains well above the Fed’s 2% target and the job market is still too tight. Many economists are expecting another rate hike in July (following the lead of Canada and Australia’s playbook of a pause and raise).
The S&P500 ended last week at 4,299, up 0.4% from the prior Friday’s closing level of 4,282. Seven sectors rose on the week, all outperforming , while technology, consumer staples, communication services and health care posted losses on the week.
Consumer discretionary stock gained the most, up +2.4% on the week amid a +14% surge from Tesla (TSLA). General Motors (GM) joined Ford (F) with integrating their North American Charging Standard connector design, developed by Tesla, into its new electric vehicles starting in 2025. Financials rose +1% for the week, with a rally in regional bank stocks helping the group bounce. The energy sector gained +1.7%. Optimism rose following a rally in oil prices after Saudi Arabia’s weekend announcement it will reduce its July exports by one-million barrels per day. OPEC+ extended their 1.1-million barrels per day of cuts through 2024. EQT (EQT) surged 5.5% for the week.
Consumer staples fell -0.5% last week, as a gain in spirits and wine company Brown-Forman from higher fiscal Q4 results only partially offset an -11% plunge in the Campbell Soup (CPB) stock after the food and snack company issued a downbeat earnings guidance.
Technology saw the biggest decline for the week, down -0.7%. Apple (AAPL) introduced its $3,499 Vision Pro mixed-reality headset at its Worldwide Developers Conference during the week.
Communication services dropped -0.4%, despite an +18% surge in the Warner Bros. Discovery (WBD) stock after the company announced the departure of CNN Chief Executive and Chairman Chris Licht. Industrials increased +1.4%, with United Rentals (URI) and Delta Air Lines (DAL) significantly outpacing sector’s gain. Utilities gained +1.9% for the week, while materials and real estate also rose 0.6% and 0.7%.
The OHFG YouTube channel is currently undergoing some placement modifications. For now, “Stock Talk” can be found by clicking on this link and subscribing to its own content. https://www.youtube.com/@OakHarvestStockTalk. Alternatively, you can type “Stock Talk with Chris” in the You Tube search box, and you should be directed to the new content. The investment content will be a “sub-channel” under our current OHFG channel. Please subscribe if you are interested.
Click here to check out this past week’s Oak Harvest Weekly Stalk Talk: SP500 – 4300, It’s Summer Time For a Break. What Does Narrow Breadth Really Mean?
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