U.S. equity markets logged tepid returns last week amid moderating inflation readings and minimal change to the unemployment figures but closed out the first half of the year with robust gains as the S&P 500 returned 15.3%. Additionally, while inflation and corporate earnings data remain at the focal point for investors, the first of two scheduled Presidential debates last Thursday, garnered much talk on both sides of the aisle. For the week, the S&P 500 was down -0.06%. The Dow Jones Industrial Average (DJIA) ended last week also down slightly at -0.08%. Small companies gained ground with the S&P 600 Small-cap Index up 1.21%.

Economic numbers last week highlighted a slowing economy that bolsters expectations of rate reductions later this year, but it may not be enough to get the Fed to lower rates quite yet. Initial unemployment claims came in at 233k, just shy of the expected 235K and the previous weeks revised number of 239K. Continuing claims were 1,839K, which was the highest since November of 2021 and higher the expected 1,821K. Preliminary May durable goods were expected to be flat but rose 0.1% month-over-month. However, April’s numbers were revised down from +0.6% to +0.2%. The Core orders, which are non-defense and excludes aircraft, were down 0.6%, well below the consensus 0.5% rise. Durable orders, ex transportation, came in as expected at 0.1% month-over-month.

Consumer sentiment has also waned a bit in recent months. The Conference Board’s Consumer Confidence Index (which measures if people are optimistic or pessimistic about the U.S. economy and their financial situation) came in at 100.4, which was a little better than the expected 100.0. However, it did fall short of last month’s 101.3. The theory behind this Index information is that optimistic people spend more and stimulate the economy while pessimistic people alter their spending habits which could lead to an economic slowdown. Readings over 100 are seen as optimistic and below that as pessimistic.

The cooling economic growth picture coincides with moderating inflation data. The Federal Reserve’s preferred inflation measure, Core PCE (excluding volatile food and energy prices), rose just 0.08% in May and 2.6% year-over-year. Both measures were in-line with expectations. The annual rate was the lowest in more than three years, according to the Commerce Department. Categories such as home improvement, furniture, and appliances saw solid disinflationary trends. Motor vehicle maintenance rebounded a bit after last month’s slight decline.

This holiday shortened week will still be busy with economic reports. Employment continues to be on the front line with the JOLTS (Job Openings and Labor Turnover Survey) report, ADP private payrolls, and nonfarm payrolls. The unemployment rate is expected to hold at 4.0% and average hourly earnings are expected to be up 0.3% month-over-month.

We hope you all have a safe and happy 4^th of July holiday.