Looking at last week’s action – the Standard & Poor’s 500 Index notched its third consecutive weekly gain, rising .6% to 5,465 and hitting an intraday record high during the week. In what has been a rarity of late, the Dow Jones Industrial Average was the leader amongst the major averages, rising 1.5% last week to 39,150, while the NASDAQ Composite finished essentially unchanged at 17,689.
Looking to the week ahead, three notable and diverse companies are scheduled to report earnings – watch for FedEx (which is considered an economic bellwether) on Tuesday, Micron Technology on Wednesday, and Nike on Thursday. This batch of earnings reports may give us a sneak preview of what things could look like when another earnings season begins in just a few weeks. The big economic report of the week comes on Friday, when the Bureau of Economic Analysis releases the Personal Consumption Expenditures Price Index.
Market expectations are the PCE rose 2.6% on a year-over-year basis last month, one-tenth of a percent less than in April. The core PCE, which excludes food and energy, is also expected to come in at 2.6%, which is two-tenths of a percentage point less than April’s reading. The PCE is the Federal Reserve’s preferred measure of inflation, and this report often moves the market. The PCE is more comprehensive and better reflects how consumers substitute what they buy to adapt to rising prices as compared to the CPI (Consumer Price Index). Inflation readings are a key component to Federal Reserve monetary policy.
Financial Markets are still expecting the Fed will cut interest rates this year, with the first cut now expected in September. The hope for interest rate cuts has been a major factor supporting the stock market rally. We expect inflation data and commentary by Federal Reserve officials will remain important inputs into market direction and psychology.
Wrapping up with a stock specific note of interest – Chipotle Mexican Grill (CMG) stock is splitting 50 for 1 this week, its first ever split. Don’t be surprised when you see a totally different price quote. Based on the current price, Chipotle stock will go from around $3200 per share to $64 per share, in one of the largest splits in the history of the New York Stock Exchange.
As always, don’t hesitate to contact us with any questions or if you would like to schedule a meeting.
All the best – Southport Station Financial Management, LLC