[BRIEFING.COM] The major averages ended the week at fresh record highs after a steady daylong push that was paced by the Dow Jones Industrial Average (+0.9%) while the Nasdaq (+0.6%) and S&P 500 (+0.5%) recorded slimmer gains. The small cap Russell 2000 (+0.8%) had a better showing than its large cap peers, but the index has another 10.0% to gain before revisiting its record from last year.
Today's advance was supported by continued hope for a rate cut taking place as soon as July 31. Fed Chairman Jay Powell's dovish two-day testimony on monetary policy was followed by an overt call for a lower fed funds rate range. Chicago Fed President, Charles Evans, said today that "a couple rate cuts" are needed in order to boost inflation. Interestingly, this comes just two months after the FOMC voter said that the fed funds rate could remain at its current level until late 2020. Furthermore, the Fed's preferred inflation gauge (core PCE) increased 1.7% yr/yr in Q1, which was a faster rate than what was seen when the central bank began raising rates at the end of 2015 (1.2%).
Eight out of eleven sectors recorded gains on Friday, with cyclical groups faring better than the countercyclical side. Industrials (+1.8%) and consumer discretionary (+1.1%) spent the day atop the leaderboard to end the week with respective gains of 1.2% and 2.1%.
Industrials rallied alongside heavyweight Boeing (BA 365.33, +6.33, +1.8%) while transport stocks outperformed. The Dow Jones Transportation Average jumped 2.4% with trucking names leading the push. JB Hunt (JBHT 92.94, +5.18, +5.9%) and Ryder (R 57.53, +3.14, +5.8%) spiked near 6.0% apiece, even though peer, U.S. Xpress (USX 4.32, -0.53, -10.9%), warned that industry conditions have worsened.
In other high-beta groups, the PHLX Semiconductor Index spiked 1.9% with all but two components finishing higher. The Index extended this week's advance to 2.9% while the broader technology sector rose 0.8%, gaining 1.5% for the week.
Elsewhere, Ford (F 10.49, +0.30, +2.9%) jumped almost 3.0% after Volkswagen confirmed that the two companies will increase their cooperation aimed at developing autonomous vehicle technology.
On the downside, the health care sector (-1.2%) spent the day behind the remaining groups. Drugmakers were pressured after Illumina (ILMN 305.05, -58.61, -16.1%) issued weaker than expected guidance for Q2 and lowered its outlook for the fiscal year. Another sector component, Johnson & Johnson (JNJ 134.30, -5.81, -4.2%), slid to a five week low after Bloomberg reported that the company could face a criminal probe into undisclosed health risks associated with JNJ's baby powder.
Treasuries started the day in the red, but a daylong rebound lifted all tenors into the green by the close. The 10-yr yield dipped one basis point to 2.11%. The U.S. Dollar Index returned into the neighborhood of its 200-day moving average (96.77), sliding 0.3% to 96.81.
Today's economic data was limited to June PPI:
- The index for final demand increased 0.1% m/m in June (Briefing.com consensus 0.0%), held back by a 3.1% drop in the index for final demand energy, while the index for final demand, excluding food and energy, rose 0.3% m/m (Briefing.com consensus +0.2%). Those readings left the index for final demand up 1.7% yr/yr, versus 1.8% yr/yr in May. That is the lowest 12-month change since January 2017. Core PPI, however, was up 2.3% yr/yr, which was unchanged from May.
- The key takeaway from the report is that Producer Price Index for June, like the Consumer Price Index for June, didn't exactly support the case for a 50-basis points cut in July. Some might argue, too, that it didn't event support the case for a 25-basis points cut in July, yet that's almost a moot (and mute) argument given the subtext of Mr. Powell's remarks in his semiannual monetary policy testimony.
Monday's economic data will be limited to the 10:00 ET release of the Empire State Manufacturing Survey (Briefing.com consensus 5.0; prior -8.6).
- Nasdaq Composite +24.3% YTD
- S&P 500 +20.2% YTD
- Dow Jones Industrial Average +17.2% YTD
- Russell 2000 +16.4% YTD