Volatile Week Delivers Small Cap Leadership and a Record SpaceX IPO

Volatile Week Delivers Small Cap Leadership and a Record SpaceX IPO

U.S. stocks finished higher in a volatile week, with the S&P 500 up 0.7%, the Dow up 0.7%, the Nasdaq up 0.7%, the Russell 2000 up 3.9%, and the S&P MidCap 400 up 2.8%. Leadership shifted toward value and small caps, with large cap value up 2.5% versus large cap growth down 0.8%. International markets were mixed, with developed international (MSCI EAFE) up 1.0% and emerging markets flat at 0.0%. Cross asset, the 10-year Treasury yield ended near 4.48% and the 30-year near 4.97%, the U.S. dollar was essentially flat to slightly weaker against major currencies, and WTI crude fell roughly 5.6% on the week.

Inflation Remains Elevated

Inflation was the week’s defining macro input, with May CPI running 4.2% year over year and core CPI at 2.9% year over year, while the month over month core CPI pace cooled to 0.2%. Producer prices were firmer, with May PPI at 6.5% year over year and 1.1% month over month. Edward Jones highlighted that the headline CPI strength was largely energy driven, while underlying pressures remained more contained, helping explain why policymakers have remained patient.

Consumers Turn Slightly Optimistic

Sentiment improved off very low levels, with the University of Michigan’s preliminary June consumer sentiment reading rising to 48.9 from 44.8 in May. On the labor front, initial jobless claims were 229,000 and continuing claims were 1.795 million in the week ended June 6, both modestly higher than the prior week. Taken together, the data kept the market narrative balanced, with inflation still elevated but consumer tone stabilizing and labor conditions not showing a sharp break.

IPO Market Reawakens

Corporate news pointed to renewed risk appetite in equity capital markets, highlighted by SpaceX’s public debut, described as the largest IPO on record. The deal’s reception offered a real time read on investor demand for high profile growth issuance and reinforced the broader rotation underway, with breadth improving and a pullback in semiconductors framed as profit taking after a very strong run.

Looking Ahead

Looking ahead, the two day Federal Reserve meeting concludes Wednesday and will be the first session led by Kevin Warsh, who is taking over as Fed chair after his nomination cleared Congress last month. While the Fed is expected to keep interest rates unchanged, Warsh’s post meeting news conference and an updated policy statement could offer clues about current market expectations for a potential rate hike by year end. Key U.S. data on the calendar include retail sales and industrial production, plus housing starts and existing home sales later in the week.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.