Stocks sprint into summer

06/28/21
  • Indexes climb to new records, latest inflation readings moderate
  • Commodities rebound, oil tops $74, energy sector rolls
  • This week: Jobs report, manufacturing data, final housing numbers

After suffering its worst week since February 26, the US stock market reversed course last week to notch its biggest weekly gain since February 5 amid mostly upbeat economic data and—for the moment—easing inflation fears.

Following through on a big Monday turnaround, the S&P 500 (SPX) hit consecutive record highs on Thursday and Friday: 

Chart 1: S&P 500 (SPX), 5/27/21–6/25/21. S&P 500 (SPX) price chart. Back on top.

Source: Power E*TRADE


The headline: Stocks bounce back, hit fresh highs amid dueling Fed/inflation narratives.

The fine print: While Federal Reserve Chairman Jerome Powell continued to downplay the risks of damaging inflation in congressional testimony last week (describing the risk of 1970s-style runaway inflation as “very, very unlikely”),1 Dallas Fed chief Robert Kaplan said the central bank could raise rates as soon as 2022, and may want to begin tapering its monthly stimulus program “sooner rather than later.”2

The number: 0.5%, the monthly increase in the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) Price Index—slightly below the consensus estimate. Also, durable goods orders for May came in stronger than expected.

The scorecard: It was a big week for all the major indexes, but the Dow took the top spot:

US stock index performance table for week ending 6/25/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector roundup: Sector roundup: The strongest S&P 500 sectors last week were energy (+6.7%), financials (+5.3%), and industrials (+3.4%). The weakest sectors were utilities (+0.7%), real estate (+1.3%), and consumer staples (+1.9%).

Highlight reel: Lydall (LDL) +85% to $61.72 on Monday, 3-D Systems (DDD) +28% to $36.87 on Tuesday. On the downside, GreenBox (GBOX) -19% to $12.57 on Monday, Bioxcel Therapeutics (BTAI) -14% to $31.68 on Wednesday.

Futures action: Crude oil climbed to within 4% of its October 2018 multi-year high last week, as August WTI crude oil futures (CLQ1) tagged a contract-high $74.25/barrel on Wednesday before closing the week at $74.00. (Another OPEC meeting kicks off on Thursday.) August gold (GCQ1) steadied after the previous week’s washout, closing Friday at $1,782/ounce. 

Coming this week

After starting the week with the month’s final housing numbers, the economic calendar builds toward Friday’s jobs report:

Tuesday: S&P/Case-Shiller Home Price Index, House Price Index, CB Consumer Confidence
Wednesday: ADP Employment Report, Chicago PMI, Pending Home Sales, Quarterly Grain Stocks (corn, wheat, soybeans)
Thursday: Challenger Job-Cut Report, Markit Manufacturing PMI, ISM Manufacturing Index, Construction Spending, Vehicle sales
Friday: Employment Report, Trade Balance, Factory Orders

This week’s earnings include:

Today: Jefferies Financial Group (JEF), Herman Miller (MLHR)
Tuesday: AeroVironment (AVAV), National Beverage (FIZZ), FactSet (FDS)
Wednesday: Bed Bath & Beyond (BBBY), Constellation Brands (STZ), General Mills (GIS), Schnitzer Steel (SCHN), Micron (MU)
Thursday: Walgreen’s (WBA), Acuity Brands (AYI), McCormick & Company (MKC)

This week’s IPO’s include:

Wednesday: Xometry (XMTR), SentinelOne (S), LegalZoom (LZ), Intapp (INTA), Integral Ad Science (IAS), CVRx (CVRX), Clear Secure (YOU)
Thursday: Torrid Holdings (CURV), D-MARKET Electronic Services & Trading (HEPS), Krispy Kreme (DNUT), EverCommerce (EVCM)

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

No June swoon

A lot can happen in three days, but if the month had ended on Friday the stock market would have booked one of its 20-best Junes of the past 60 years.  

The SPX was up 1.8% for the month at the end of last week—light years better than the index’s 0.08% median June return over the past 30 years, and more than three times as big as the 0.5% median return of the more-bullish past decade.

If the market simply holds its 14% year-to-date return through Wednesday, the SPX would enjoy its second-best first half of a year since 1998, and its 12th-best since 1960.

 

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1 The Wall Street Journal. Fed’s Powell Plays Down Inflation Threat. 6/22/20.
2 Bloomberg.com. Fed’s Kaplan Sees Hike in 2022, Taper Starting Sooner. 6/23/21.

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