Market Update: June 6, 2023
Photo by Tarun Ottur on Unsplash
Economic data for the holiday-shortened week included strength in the May employment situation report and construction spending, while ISM manufacturing and consumer confidence declined.
Global stocks broadly rose last week, helped by the conclusion to the U.S. debt ceiling negotiations and strong labor data. Bonds fared well as interest rates ticked downward. Commodities were mixed, with energy again falling back.
U.S. stocks gained last week, with Wednesday night’s news of the House passing the U.S. debt ceiling deal in an uneventful manner, seen as the biggest hurdle to full approval, which was followed by the Senate on Thursday night. This pushes the ceiling beyond the 2024 election and into Jan. 2025. The formal name, the ‘Fiscal Responsibility Act,’ might either be seen as antagonistic or ironic, depending on what side one is on, as it features a variety of discretionary spending caps for future years, reducing funding for the IRS, among other projects approved in earlier legislation. Friday’s strong jobs report also buoyed sentiment higher.
Every sector ended in the positive last week, led by consumer discretionary, materials, and industrials; defensive consumer staples and utilities experienced the smallest gains. Real estate also gained over 3% with lower interest rates.
Foreign stocks gained, albeit to a lesser degree than U.S. equities, aside from Japan, which outperformed. Sentiment appeared largely driven by the U.S. debt ceiling finale, as well as slowing eurozone inflation. In emerging markets, most of the largest nations earned moderate gains, with leadership by Turkey, which sharply outperformed on the heels of the completion of a long election cycle and re-election via runoff of the current president, providing at least continuity. Mixed manufacturing data from China continued, one report stronger and one weaker, which offers a conflicting message relative to hopes for a strong post-Covid recovery. As in the U.S., challenged goods-related spending has been offset by far stronger growth in services (such as retail spending).
Bonds gained across the board last week, as interest rates fell on the longer end of the treasury yield curve. This was likely related to weaker manufacturing data as well as the short-term ‘risk premium’ built in with the debt ceiling uncertainty. Investment-grade credit and high yield both outperformed governments, while floating rate bank loans also fared positively. Foreign bonds also fared well, with rates and spreads cooperating.
Commodities were little changed on net for the week, with small gains in agriculture and metals offset by a decline in energy. Crude oil fell over a percent last week to under $72/barrel, with uncertainty over the upcoming OPEC meeting, along with rising U.S. inventories. Natural gas prices fell another -10% (over -50% year-to-date and -75% over the past year), due to the influences of better weather and high storage.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.