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Weekly Update

Market Summary

Investors brushed off trade conflict concerns and geopolitical turmoil ahead of the G-7 Summit this past weekend with U.S. equities posting solid gains for the week. The Dow popped up 2.8% for its biggest weekly gain in three months, while the S&P and Nasdaq indices rose 1.6% and 1.2%, respectively. The telecommunication and consumer discretionary sectors led the way amid a chunk of positive earnings reports. Last week’s positive investor sentiment has spilled over into early trading this week bolstered by news that Italy’s antiestablishment government has ruled out the possibility of leaving the Eurozone.

Despite the positive market movements, tensions between the U.S. and several of its major allies were heightened at the Group of Seven Summit and many investors remain concerned that those tensions will generate an escalation of the current trade conflict. U.S.-Canadian relations were particularly strained as President Trump lashed out at Canadian dairy subsidies following a press conference at which Prime Minister Justin Trudeau criticized new U.S. tariffs on steel and aluminum. In addition, Trump rescinded his support for a previously agreed upon, joint G-7 declaration on the importance of a rules-based international trading system, marking a huge divide between the U.S. and other leading economies.

The confluence of trade tensions with political unrest in the Middle East and Venezuela come at a time of slowing global economic growth and efforts of several central banks to tighten monetary policy. Shares of small U.S. companies have benefitted from the international concerns as they are less sensitive to overseas turmoil than their larger, multinational peers. The Russell 2000, a U.S. small-cap index, is up 9.5% year-to-date, outgaining most other indices.

Trading volume was relatively low this past week as investors have broadly been awaiting the results of several significant events to take place in the coming week. These include President Trump’s meeting with Kim Jung Un of North Korea and the Federal judiciary verdict on the AT&T and Time Warner merger on Tuesday, as well as the Federal Reserve meeting on Wednesday. Any surprise outcomes could generate some greater market volatility in the week ahead.

Economic Highlights

  • Employment: The number of Americans filing for unemployment benefits unexpected fell to 222k this past week. The initial jobless claims reading demonstrated further tightening of the labor market as investors look ahead to the Federal Open Market Committee (FOMC) meeting this Wednesday.
  • Oil: Crude oil prices edged down this past week on rising global production. US crude oil inventory came in at 2.07 million barrels, far above the estimates of 1.824 million barrels. Additionally, OPEC has announced that member nations including Saudi Arabia would begin ramping up production in order to offset potential supply outages in Iran and Venezuela.

US Economy - The Week Ahead

Tuesday, 6/12/2018

US Consumer Price Index (CPI) Year-Over-Year – Consensus Estimate: 2.7%, Prior Month: 2.1%

Wednesday, 6/13/2018

FOMC Interest Rate Decision – Consensus for a +0.25% rate hike
US Producer Price Index (PPI) Year-Over-Year – Consensus Estimate: 2.8%, Prior Month: 2.6%

Thursday, 6/14/2018

Initial Jobless Claims – Consensus Estimate: 222,000 (0% WoW), Prior Week: 222,000 (-0.4% WoW)

Friday, 6/15/2018

University of Michigan Consumer Sentiment Survey – Consensus Estimate: 98.5 (0.5% MoM), Prior: 98.0 (-0.8% MoM)
US Industrial Production MoM Growth – Consensus Estimate: 0.2%, Prior Month: 0.7%

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