In this daily market update, we’ll review the recent performance of U.S. equities and delve into the factors that influenced the market. Last week, the S&P 500 index experienced notable gains, reaching fresh 52-week highs, propelled by stronger-than-expected retail sales. However, concerns about inflation persisted, with Goldman Sachs cautioning that markets might be underestimating the potential for delayed-onset inflation in certain sectors. Additionally, we’ll explore the currency markets, commodities, and the performance of gold and cryptocurrencies.
U.S. Equities: Strong Retail Sales Drive Gains
U.S. equities witnessed a dip across the board on Friday, but not before the Nasdaq and S&P 500 reached a near 14-month high. The S&P 500 index rose by 2.6% during the week, surging to fresh 52-week highs fueled by robust retail sales figures that exceeded expectations. At the end of the week, the S&P 500 closed at 4,409.59, surpassing the previous week’s close of 4,298.86. Despite closing slightly below Thursday’s level, the index sustained its upward momentum, marking a six-session winning streak. Meanwhile, the Dow declined by 0.3%, and the Nasdaq experienced a slide of approximately 0.7%.
Inflation Concerns: Markets May Be Underestimating
Goldman Sachs issued a warning over the weekend, signaling that inflation in the United States might not decrease as swiftly as currently anticipated by the markets. The report highlighted the possibility of “delayed-onset inflation” in sectors like healthcare, which investors may be overlooking. It also stated that assumptions regarding a rapid easing of price pressures due to a significant deceleration in U.S. economic growth may be misguided. The report emphasized limited chances for these factors to effectively curtail inflation.
Currency Markets: Japanese Yen Weakened, Euro and Pound Showed Strength
The Japanese Yen experienced a significant decline against the Euro, plummeting to a 15-year low after the Bank of Japan (BOJ) maintained its ultra-low interest rate policy. This policy contrasted with the European Central Bank’s (ECB) decision to hike rates on the day following the pause in rate hikes by the U.S. Federal Reserve. The EUR/JPY pair reached 155.16, while the USD/JPY pair recorded a daily gain of 1.1%, reaching an intraday high of 141.91, the highest since November. This upswing represented the most substantial daily percentage gain for USD/JPY since late April. Furthermore, ECB President Christine Lagarde’s announcement that another rate hike in July was highly likely further fueled the rally. As a result, GBP/USD rose by 0.4% to 1.2831, reaching its highest level since April 2022, as traders increased their bets on a rate hike by the Bank of England (BoE) later in the week.
Commodities: Crude Oil Rises on Chinese Demand and OPEC+ Cuts
Crude oil prices advanced despite concerns over the global economy and potential interest rate hikes. Increased Chinese demand and supply cuts implemented by OPEC+ supported the rise in prices. Brent crude settled at $76.61 per barrel, gaining $0.94, while West Texas Intermediate (WTI) crude rose by $1.16 to $71.78. Brent saw a weekly gain of 2.4%, and WTI rose by 2.3%. The surge in crude oil prices was buoyed by growing Chinese
demand, with refinery throughput in China reaching its second-highest level on record in May. Additionally, voluntary output cuts by OPEC+ and an additional cut by Saudi Arabia scheduled for July contributed to the upward momentum.
Gold: Limited Movement Amid Mixed Signals
Gold experienced notable fluctuations but remained within a tight trading range witnessed over the past month. The Fed’s mixed signals and the uncertain state of the U.S. economy provided little direction for a significant breakout in either direction. Following the mid-week rate decision, gold initially faced selling pressure but recovered most of its losses on Thursday as traders reassessed their expectations for additional rate hikes. However, gold failed to break out of the $1,930 to $2,000 trading range. Spot gold remained flat at $1,958.26 per ounce, while COMEX gold futures steadied at $1,970.45 per ounce.
Cryptocurrencies: Bitcoin and Ether Experience Volatility
Bitcoin (BTC) encountered a 3.47% decline, dropping to as low as $24,756 on Thursday before rebounding above $26,000 to $26,785 by Sunday. The market witnessed this recovery following news that Binance.US agreed to transfer its U.S. customers’ wallets to the U.S., effectively resolving concerns raised by the U.S. Security Exchange Commission (SEC) regarding the potential freezing of Binance.US assets. It’s worth noting that the court ultimately denied the SEC’s request to freeze the assets. Ether (ETH) also experienced volatility, falling by more than 9% to $1,600 before recovering to $1,771 over the weekend.