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Market Recap – June 5, 2023

Keel Point

June 5, 2023

It is sometimes difficult to know what news has the biggest impact on financial markets, but last week the S&P 500 rallied 2.8% from its low point on Wednesday on news of a debt ceiling bill passing a crucial house rules committee vote, comments by the newly nominated Fed Vice Chair favoring “skipping a rate hike” in June and a generally positive May jobs report.

  • Resolving the debt-ceiling impasse was critical to stability in financial markets, but the certainty of a solution triggered concern that its resolution allowed the Fed to revisit a further rate increase in June to address higher than expected inflation in April.  Last Wednesday, two FOMC members rebutted hawkish comments from others, thereby reducing equity market angst.  
  • Non-farm payrolls increased by a better-than-expected 339,000 last month, but the unemployment rate still increased to a seven-month high of 3.7% because of reporting differences in the household vs employer surveys relating to self-employed workers. Wage growth slowed and average weekly hours worked also declined slightly.  Overall, all this was positive for equity markets which were up 1.45% after the Friday report.  
  • Exports are set to fall in the second quarter while imports rise, which means negative net exports will subtract around 1.5% points from second-quarter GDP growth.  

Even without changes to the Fed funds rate at the Fed’s June 13-14 meetings, they will be providing an updated Summary of Economic Projections revealing the FOMC member expectations for inflation, economic growth, and interest rates for the rest of 2023 and into 2024-2025.

  • May CPI inflation will be reported on Tuesday, June 13, and PPI inflation on Wednesday, June 14.  Keel Point’s Steve Skancke will be on Bloomberg Radio on June 13 at 3:05 p.m. to discuss their impact and likely Fed response.
  • With inflation still stickier and the labor market hotter than the Fed would like, there is still a good chance they will raise rates and reduce liquidity further at their July meeting based on June labor market and inflation data.

Artificial Intelligence (“AI”) continues to be a catalyst for positive earnings growth in tech companies which have been a principal driver of stock market performance – the S&P 500 being up 11.53% and the Nasdaq 100 being up 33.91% so far in 2023.

Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients. 

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