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Markets Last Week 

  • S&P 500 (SPY): -2.54%
  • Nasdaq (QQQ): -4.72%
  • Dow Jones (DIA): -1.54%
  • Russell 2000 (IWM): -2.47%
  • Apple (AAPL): -2.60%
  • Amazon (AMZN): -6.47%
  • Meta Platforms (META): -6.62%
  • PayPal (PYPL): -8.60%
  • JP Morgan (JPM): -3.40%
  • Occidental Petroleum (OXY): +3.13%
  • Alibaba (BABA): -3.23%
  • AMC Entertainment (AMC): +6.82%
  • Gamestop (GME): -9.89%
  • Bed Bath & Beyond (BBBY): -31.37%
  • Kohls (KSS): -26.67%

Summary

Stocks finished a choppy session higher on Friday as equities closed out the worst start to the year in 52 years. The move lower comes following a mixed set of economic results this week, which offer some evidence that, while still elevated, there are small signs that inflation is softening. 

West Texas intermediate crude oil futures rose back above $108 per barrel after logging the first monthly decline since November 2021 in June. And the 10-year Treasury yield fell below 2.9%, declining sharply from a more than decade-high of nearly 3.5% reached in mid-June.

Early in the morning, S&P Global’s final manufacturing purchasing managers’ index (PMI) for June was revised up to 52.7, which was still the lowest since July 2020, but better than the 52.4 previously reported for the month.

On Thursday, the Commerce Department reported that core personal expenditures – the Federal Reserve’s preferred measure of inflation – decelerated slightly in May but remains well above the Fed’s target. Core PCE,  the value of the goods and services purchased by people in the US, rose by 4.7% over last year compared to the 4.8% increase anticipated, according to Bloomberg data. Headline inflation, which includes energy and food price changes, also rose slightly less than expected, or at a 6.3% annual rate to match April’s pace. However, separate data showed real personal spending fell by a larger-than-expected 0.4% in May after a rise of 0.7% in April, suggesting consumers were pulling back on some spending with inflation at current levels. Here is the PCE report.

In response to elevated prices, Federal Reserve Chair Jerome Powell reaffirmed the central bank’s commitment to fighting inflation, suggesting that this aim will take priority over fully preserving activity elsewhere in the economy. During the European Central Bank’s annual economic policy meeting, Powell said “Is there a risk we would go too far [regarding interest rate hikes]. The bigger mistake to make – let’s put it that way – would be to fail to restore price stability.” Earlier in the month, Powell suggested either a 50 or 75 basis point interest rate hike would most likely be on the table following the Fed’s July meeting. And in the weeks since, a number of other key central bank officials have affirmed this stance. In my opinion, I think we will see another 75 basis point hike. 

Highlights

  • Shares of Kohls sank after the retailer said it was ending discussions to be sold to Franchise Group, the parent company of The Vitamin Shoppe. “Given the environment and market volatility, the Board determined that it simply was not prudent to continue pursuing a deal,” Peter Boneparth, chair of the Kohl’s board, said in a statement.
  • Micron Technology (MU) shares dropped after the company issued a current-quarter forecast that came in far short of consensus estimates, leading to a slew of lowered price targets for the stock among major Wall Street firms.
  • Global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan analysts warned. 
  • Alphabet’s Google will pay $90 million to settle with app developers who argued Google used agreements with smartphone makers to shut them out of various revenue streams.
  •  General Motors Co surpassed Toyota Motor Corp in second-quarter U.S. car sales, data on Friday showed, even as persistent chip shortages and supply-chain disruptions crimped automakers’ ability to meet pent-up demand.
  • GM, which lost its crown as the U.S. sales leader last year for the first time since 1931 to Toyota, said it sold 582,401 vehicles in the quarter vs 531.105 by Toyota. Both figures are down 15 and 22% year-to-date respectively
  • China’s slowing economy and an inflation-driven drop in consumer spending are expected to drag down global shipments of computers and smartphones this year, according to research firm Gartner.

“”The way to get started is to quit talking and begin doing.” –Walt Disney