Stocks take inflation in stride

  • Small caps and tech set the pace
  • Oil tags $71, 10-year yield hits three-month low
  • This week: FOMC, PPI, retail sales, quarterly expiration

Despite another potentially troublesome economic data point, the US stock market enters the quarterly expiration week at fresh highs.

The S&P 500 (SPX) set its first new record in more than a month last Thursday—the same day the Consumer Price Index (CPI) kept inflation concerns front and center with another higher-than-expected reading—and followed up with another on Friday:

Chart 1: S&P 500 (SPX), 4/16/21–6/11/21. S&P 500 (SPX) price chart. week closed strong.

Source: Power E*TRADE

The headline: Market sidesteps inflation on route to new milestone.

The fine print: The overall and core Consumer Price Index (CPI) readings for May were higher than expected at 0.64% and 0.74%, respectively, but both were also down from April. That said, the core CPI’s 1.66% April–May jump was its biggest two-month increase since September 1981.(Morgan Stanley analysts had this to say about inflation after last month’s numbers came out.)

The number: 16, the number of consecutive days crude oil futures have made a higher intraday or closing high.

The move: The 10-year T-note yield fell 0.117 to an intraday low of 1.44% last Thursday—its lowest level in more than three months, and the bottom of the trading range noted in “Stock low, options positions high.”

The scorecard: The small-cap Russell 2000 (RUT) led the index pack for a third week:

US stock index performance table for week ending 6/11/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE

Sector roundup: The strongest S&P 500 sectors last week were real estate (+1.9%), health care (+1.8%), and consumer discretionary (+1.6%). The weakest sectors were financials (-2.5%), materials (-2.1%), and industrials (-1.8%).

Highlight reel: Biogen (BIIB) +38% to $395.85 on Monday, American Software (AMSWA) +39% to $28.27 on Wednesday. On the downside, Hookipa Pharma (HOOK) -24% to $13.25 on Monday, GameStop (GME) -27% to $220.39 on Thursday.

Futures action: July WTI crude oil (CLN1) closed Friday at $70.91/barrel after trading briefly above $71. It was the second-straight week the market hit a new contract high every day. August gold (GCQ1) closed a mostly sideways week with a Friday sell-off to $1,879.60/ounce. Biggest up moves: July natural gas (NGN1) +6%, December corn (ZCZ1) +3.1%. Biggest down moves: July lumber (LBSN1) -17.5%, June ether (ERM1) -11%.

Coming this week

There are only three days this week with notable economic releases, but it’s a heavy-hitting lineup—and Friday is the quarterly “Quadruple Witching” expiration:

Tuesday: Retail Sales, Producer Price Index (PPI), Industrial Production, Capacity Utilization, Business Inventories, NAHB Housing Market Index 
Wednesday: Housing Starts and Building Permits, Import and Export prices, Fed interest rate announcement
Thursday: Leading Indicators
Friday: Quarterly expiration (stock, stock index, stock index futures, and single-stock futures all expire)

This week’s earnings include:

Monday: H&R Block (HRB), JinkoSolar (JKS), Oracle (ORCL), Lennar (LEN)
Tuesday: La-Z-Boy (LZB)
Wednesday: At Home (HOME), Kroger (KR)
Thursday: Adobe (ADBE), Commercial Metals (CMC), Jabil (JBL)

This week’s IPO’s include:

Tuesday: Acurx Pharmaceuticals (ACXP), Engine Media (GAME)
Wednesday: Molecular Partners (MOLN), WalkMe (WKME), Convey (CNVY)
Thursday: Unicycive Therapeutics (UNCY), Lyell Immunopharma (LYEL), Angel Oak Mortgage (AOMR)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

So far, so June

A new all-time high aside, the broad market’s modest performance last week was in line with some of its long-term historical patterns—specifically, June’s tendency for generally quiet trading. The four-day week after Memorial Day was a better-than-average up week (per that holiday’s trading pattern), while last week’s lukewarm gain reflected the post-outside-week pattern noted in “Market starts June near highs.” It was also the SPX’s narrowest-range week of the year.

But don’t look for this week’s “witching” expiration to amp up the volatility: Back in the day, perhaps, quarterly expirations were sometimes occasions for stock-market fireworks as traders attempted to adjust positions in stock options, index options, and index futures that were all going off the books at the same time. But with the prevalence of weekly option expirations and continued improvements in electronic trading, the wild expiration swings of yore have become fewer and further between.


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1 Reflects seasonally adjusted monthly CPI data from the U.S. Bureau of Labor Statistics.

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