Weekly Market Performance - Growth Leads While Small Caps Pull Back
U.S. and International Equities
US large cap indices extended gains from last week, led by the growth-heavy Nasdaq Composite. However, small caps (Russell 2000) equities bucked the trend and finished lower. International markets (MSCI EAFE and MSCI EM) were also lower for the week.
Growth sectors lead
This week was positive for many value sectors such as materials and industrials, however growth sectors such as information technology, communication services, and consumer discretionary saw the biggest gains, along with healthcare. As the economic reopening advances, many traders still believe that growth stocks can continue their run higher even if the prospects for cyclicals should improve.
Fixed Income Recap
The Bloomberg Barclays US Aggregate gained ground this week as yields decreased. All fixed income sectors moved in lockstep as fixed income investors continue to take solace in the Fed’s policy stance concerning inflation. Both the corporate and muni high yield sectors continue to outperform in what has, so far, been a down year for many fixed income categories.
Commodities were broadly higher despite dollar strength. Oil and natural gas continue to be bright spots, as WTI crude oil prices briefly eclipsed $76/bbl., while natural gas boosted its year-to-date gain to more than 40%. Gold prices climbed modestly, but ended June with its worst month since 2016, down more than 6%.
“Trends evident through June certainly continued this week as growth stocks lead and yields moved lower,” explained LPL Research Senior Vice President and Director of Research Marc Zabicki. “While the market again proved resilient this week, as it often does ahead of July 4th, we get the sense that investors will be scrutinizing July’s earnings season activity very closely. Continued earnings strength may be needed to help justify recent trend breakouts in some major averages.”
U.S. Economic Data Recap
June Job Numbers
The U.S. Bureau of Labor Statistics stated that the economy gained 850,000 jobs in June, which surpassed the Bloomberg survey estimate for just over 700,000. The unemployment rate increased 0.1% to 5.9% amid an unchanged labor force participation rate 61.6%. Read more on this recent post from the LPL Research blog.
June Manufacturing Activity
The Institute for Supply Management (ISM) stated this week that its index which measures U.S. manufacturing activity declined in June from May. This reading also came in below economist’s expectations. Moreover, the ISM’s index reading was the lowest since January. As we have seen, factories are struggling to satisfy demand as supply chains and the global shipping industry are disrupted.
Initial Jobless Claims Drop Back Below 400k
According to the U.S. Department of Labor, initial filings for unemployment benefits declined last week, with over 360,000 Americans filing claims. A consensus of Bloomberg-surveyed economists expected over 380,000 new filings. At the same time, continuing claims rose slightly and still remain well above the early March 2020 levels of approximately 1.7 million.
Next week, the following economic data is slated to be released:
Tuesday: June Markit Purchasing Managers Index (PMI), June Institute for Supply Management non-manufacturing index
Wednesday: US Bureau of Labor Statistics May Job Opening and Labor Turnover survey, Federal Open Market Committee (FOMC) minutes.
Thursday: Weekly initial and continuing claims, May consumer credit
Friday: May wholesale inventories
Have a healthy and safe 4th of July weekend!
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