News
What to know this week
Actions closed another week close to record highs While the Latest jobs report showed a U.S. job market that is cooling, but not at a rate that economists find worrying.
The Nasdaq composite (^IXIC) rose about 2.3%, and the S&P 500 (^GSPC) rose around 1.3%. The Dow Jones Industrial Average (^DJI) rose around 0.3%.
Highlights of the week include the Federal Reserve’s June meeting and a key inflation reading on Wednesday. The first consumer sentiment reading for June is also expected on Friday.
In corporate news, Big Tech will start the week with Nvidia (NVDA) 10-for-1 stock split and Apple (AAPL) Worldwide Developers Conference scheduled for Monday. A vote on Tesla (TSLA) CEO Elon Musk’s $56 billion pay package is expected on Thursday.
About that, chaotic movements in GameStop stock (GME) continued to attract investor attention as the return of Keith Gill, a popular leader of the 2021 meme stock frenzy, reignited interest.
The Fed, inflation and the path of interest rates
Friday’s May Jobs Report showed more job additions than expectedadding fuel a common narrative from Federal Reserve officials that the labor market remains on a solid enough basis to maintain interest rates at their current restrictive levels. And for economists, the latest data only underscores that the Fed needs to see inflation decline further before cutting rates.
“Policymakers will need to see some slower inflation reports over the summer to begin cutting rates in the fall,” Wells Fargo senior economist Sarah House wrote in a research note Friday.
The next inflation update is expected on Wednesday morning, with the release of the Consumer Price Index (CPI) for May. Wall Street expects a 3.4% annual gain for the core CPI, which includes food and energy prices, unchanged from April. Prices are expected to rise 0.1% month-on-month, down from 0.3% in April.
On a “core” basis, which excludes volatility in food and energy prices, inflation is expected to have increased 3.5% year on year, a slowdown from the 3.6% increase seen in April. Monthly base price increases are expected to be 0.3%, unchanged from the previous month.
The release will come just hours before the Fed’s latest policy decision, where markets largely expect the central bank to keep rates unchanged. This shifts the main focus to the Fed’s latest Summary of Economic Projections (SEP) – including its “dot plot,” which maps policymakers’ expectations about the direction interest rates might take in the future – as well as comments from Fed Chairman Jerome Powell.
The story continues
JPMorgan chief U.S. economist Michael Feroli expects the Fed to project a median of two interest rate cuts this year in its dot plot, down from three in March. Regarding Powell’s comment, Feroli believes Powell’s communicator will be seen as “peaceful.”
“At the press conference, we expect Chairman Powell to express confidence that the economy is still on track and that the FOMC can be patient to gain confidence that inflation is heading toward 2%,” Feroli wrote in a note to clients on Friday. .
Less cuts, no problems
Before Friday’s jobs report, the market was forecasting two rate cuts this year. After the release, this number fluctuated between one and two, according to data from Bloomberg.
Notably, though, this change is a 15 basis point jump in the 10-year Treasury yield (^ TNX) to 4.43% did little to deter investor optimism as the S&P 500 closed near a record high on Friday.
Lauren Goodwin, economist and chief market strategist at New York Life Investments told Yahoo Finance This may be because the stronger-than-expected jobs report is good news for the economy and “markets have been very focused on growth.”
She added that given the solid earnings outlook expected for the rest of this year and a solid growth trajectory for the economy, markets can take the Fed’s reassessment “in stride.”
Federal Reserve Chairman Jerome Powell listens to a meeting of the Financial Stability Oversight Council at the Treasury Department on May 10, 2024, in Washington, D.C. (Kent Nishimura/Getty Images) (Kent Nishimura via Getty Images)
Apple’s WWDC
Apple’s Worldwide Developers Conference is set to begin on Monday, with investors hoping for more details to be released about the tech giant’s push into generative AI.
After a difficult start to the year, shares rose more than 7% in the last month before the event and recently turned positive for the year.
Yahoo Finance’s Dan Howley has a full preview of the event.
More Nvidia Stocks
Nvidia shares are expected to begin trading on Monday on a new 10-for-1 split basis, revising the share price from its Friday close of $1,208.88 to $120.88. The split means that owners of Nvidia common stock at market close on Thursday received 10 shares for every share they held. For example, if a shareholder owned four shares of Nvidia on Thursday, they will now own 40 shares after the split.
Typically, stock splits are seen by investors as a sign of strength, and consequently, companies that split their shares typically outperform the S&P 500 in the year following their announcement.
On average, shares rise 25% in the 12 months following a split announcement, compared with an average return of 12% for the S&P 500 over the same period, according to Bank of America analysis. This has been true “across market regimes,” wrote Jared Woodard, investment and ETF strategist at BofA, in a note to clients.
Notably, the trend includes the period from 2000 to 2009, amid the unfolding of the technology bubble. Since Nvidia announced its split on May 22, shares have risen about 27%.
Musk’s money
Tesla’s annual shareholder meeting is scheduled for after the market closes on Thursday, and the most pressing issue will be shareholder vote in a potential $56 billion pay package for CEO Elon Musk.
Morgan Stanley analyst Adam Jonas said he advised investors to pay close attention to the vote as it will have “importance for the company’s long-term strategic direction.”
He added: “While it is impossible to predict the outcome, we expect the event could potentially generate significant volatility in TSLA shares.”
In a survey of 109 investors, Morgan Stanley found that most investors feel approving Musk’s pay package would boost Tesla shares, while a vote not to approve would weigh on the stock. Entering the meeting, Tesla shares were down nearly 30% this year.
Weekly Calendar
Monday
Economic data: New York Fed One-Year Inflation Expectations May (3.26% previously)
Earnings: No notable gains.
Tuesday
Economic data: NFIB Small Business Optimism, May (89.5 expected, 89.7 previously)
Earnings: Gym for sports and outdoor activities (ASO), Casey (CASY), Oracle (ORCL)
Wednesday
Economic data: Consumer Price Index, month over month, May (+0.1% expected, +0.3% previously); Core CPI, month-over-month, May (+0.3% expected, +0.3% previously); CPI, year-over-year, May (+3.4% expected, +3.4% previously); Core CPI, year-over-year, May (+3.5% expected, +3.6% previously); Average real hourly earnings, year on year, May (+0.5% previously); MBA mortgage applications, week ending June 7 (-5.2% previously); FOMC Rate Decision (No Change in 5.25% to 5.5% Range Expected)
Earnings: Broadcom (AVGO), Dave and Buster (TO PLAY), Vera Bradley (VRA)
Thursday
Economic data: Initial unemployment claims, week ending June 8 (223,000 expected, 229,000 previously); Producer Price Index, month-on-month, May (+0.1% expected, +0.5% previously); PPI, year-over-year, May (+2.5% expected, 2.2% previously);
Earnings: Adobe (ADBE), Lovesac (LOVE), HR (HR), Signet Jewelers (GIS)
Friday
Economic data: University of Michigan Consumer Sentiment, June Preliminary (72.8 expected, +69.1 previously) Import Prices, Month-over-Month, May (+0.1% expected, +0.9% previously); Export prices, month-over-month, May (+0.2% expected, +0.5% previously)
Earnings: No notable gains.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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