Closing Market Update

Published as of: June 14, 2024, 4:45 p.m. ET

(Friday market close) The S&P 500^® index (SPX) eased from a record high after a report showed consumer sentiment soured this month. The index still posted its seventh weekly gain in the past eight weeks, boosted by cooler inflation readings that rejuvenated hopes for lower interest rates from the Federal Reserve.

Continued strength in mega cap companies including Google parent Alphabet (GOOGL) and Nvidia (NVDA) helped the Nasdaq Composite^® ($COMP) edge to an all-time high for the fifth consecutive day. But the market otherwise concluded a data- and Fed-heavy week on a soft note amid signs that elevated inflation and interest rates remain a burden on consumers. 

Earlier Friday, the University of Michigan’s initial Index of Consumer Sentiment for June fell to 65.6 from 69.1 in May, the measure's third consecutive monthly decline and the weakest reading since November. Analysts expected the index to rise to about 73.0, according to Briefing.com.

According to the survey's director, Joanne Hsu, "consumers' assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes. Overall, consumers perceive few changes in the economy from May."

Here's where the major benchmarks ended:

• The S&P 500 index fell 2.14 points (0.04%) to 5,431.60, up 1.6% for the week; the Dow Jones Industrial Average^® ($DJI) lost 57.94 points (0.2%) to 38,589.16, down 0.5% for the week; the Nasdaq Composite gained 21.32 points (0.1%) to 17,688.88, up 3.2% for the week.
• The 10-year Treasury note yield (TNX) fell more than 2 basis points to 4.215%, after earlier dropping under 4.19%, its lowest since late March.
• The Cboe Volatility Index^® (VIX) rose 0.72 to 12.66.

Energy shares were among the market's weakest sectors despite modest gains in WTI Crude Oil futures (/CL), which ended around $78.34 per barrel and broke a three-week losing streak. Banks and retailers were also soft, while communication services led gainers. The small-cap Russell 2000^® Index (RUT) dropped 1.6% Friday and fell 1% for the week.

In other markets, the U.S. Dollar Index ($DXY) extended this week's rally to reach its strongest level since early May behind political uncertainty in Europe, centering around French President Emmanuel Macron’s decision to dissolve the National Assembly and call snap legislative elections at the end of June. The euro (EUR/USD) dropped under $1.07, its weakest point against the U.S. dollar in six weeks.

The following companies had stock price moves driven by analyst ratings, quarterly earnings or other news:

• Adobe (ADBE) rallied more than 14% after the software company late Thursday reported stronger-than-expected earnings and revenue.
• Boeing (BA) fell 1.9% after The New York Times reported that the Federal Aviation Administration (FAA) opened an investigation into counterfeit titanium used in some recently manufactured planes. 
• Hasbro (HAS) added 6% after Bank of America (BAC) upgraded the stock to "buy" from "neutral," citing expectations the toymaker's digital gaming strategy could lift earnings. 
• Nucor (NUE) gained 0.4%, rebounding from initial declines after the steelmaker said it expected its second-quarter earnings would be well below year-ago levels due to lower average selling prices.
• RH (RH) sank 17% after the upscale retailer reported a larger than expected loss for the first quarter.
• ZScaler (ZS) gained 1.8% after JPMorgan Chase (JPM) upgraded the cloud security company to "overweight" from "neutral." 

Next week brings quarterly earnings from two major homebuilders, KB Home (KBH) and Lennar (LEN). KB Home shares have gained over 9% so far this year and Lennar has climbed 4.1%, but both lag the S&P 500's 14% gain.

Data next week includes May Retail Sales on Tuesday morning along with Industrial Production and Capacity Utilization. Other numbers to watch are Housing Starts and Building Permits, as well as Existing Home Sales. The week is light on jobs and price-related data.

Despite Friday's downbeat counterpoint from the University of Michigan consumer survey, economic data this week brought largely encouraging news for investors, at least on the inflation front. 

Both of the Labor Department's monthly inflation gauges, the Consumer Price Index (CPI) and the Producer Price Index (PPI), came out cooler than expected, bolstering ideas that price pressures are resuming a downward path following a three-month resurgence early this year. Closely followed core CPI, which excludes volatile food and energy prices, posted a 3.4% rise in May, the lowest annual increase in over three years.

The CPI and PPI numbers prompted the market to dial up odds for a rate cut later this year, though, as Fed Chair Jerome Powell noted earlier this week, inflation remains above the central bank's 2% long-term target.

"Inflation has eased notably over the last two years but remains above our 2% goal," Powell said Wednesday, after the Federal Open Market Committee (FOMC) concluded its latest meeting. The CPI report "builds confidence, but we don't have the confidence that would support loosening policy at this time."

The Fed left its benchmark funds rate target unchanged at 5.25% to 5.5%, as expected, and also released an updated economic forecast that included a "dot-plot" projection for just one quarter-point cut this year. Earlier this year, the FOMC dot-plot signaled three quarter-point cuts. 

While the Fed continued its cautious tone on the question of rate cuts, many analysts expect at least one cut this year if inflation continues to recede.

"We believe the rate-cutting cycle is still likely to start this year for most developed market central banks, and that the cuts will be because inflation is lower and not because economic growth has slipped," Michelle Gibley, Schwab's director of international research, and Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research, said in a report.

An expected rate-cutting cycle "is a positive for equities but the uncertainty over timing, as well the rise of populism in elections globally, could result in further market volatility this year," the analysts said. Inflation data "is trending in the right direction but as Fed Chair Jerome Powell conveyed this week, it’s still 'not enough' to warrant rate cut discussions," the analysts added.

Late Friday, traders priced roughly 71% odds the fed fund rate will be at least one quarter point lower following the FOMC's September meeting, up from 50% a week ago, based on the CME FedWatch Tool. The tool priced almost 86% odds chance the rate will be unchanged after the July FOMC meeting.

Read more about Schwab's outlook in "The Fed Holds Rates Steady and Remains Patient."