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S&P 500, Nasdaq Close at Fresh All-Time Highs

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Markets indexes were sagging for most of this first trading day of a new week, but got a wake-up call a half-hour before the closing bell and the buying started: the Dow finished the day -0.25% while the S&P 500 grew 0.18% and the Nasdaq won the day yet again, +0.74%. Both the S&P and Nasdaq reached new record closes today, to 4255 and 14,714, respectively. The small-cap Russell 2000 lagged the other indexes today, -0.41%.

As we’ve seen for the past several weeks overall, market trading was measured and well-behaved throughout the session, with Tech and Communications leading the way among the 11 S&P 500 sectors. Materials, Financials and Energy were lower on the day — another sign of the rotation out of cyclicals and back into growth names. Investors look to be playing relative valuations which, while striking new closing highs today, have nevertheless been methodical in keeping gains — and losses — within range.

Much is expected from the press conference with Fed Chair Jay Powell on Wednesday, following the two-day meeting of the Federal Open Market Committee (FOMC) which begins tomorrow. In particular, listening for any changes in the assessment of current inflation measures — is it still as transitory as the Fed has expected? The bond market seems to agree that it is; the 10-year yield is still around 1.5% today.

The Fed will have much on its plate to discuss and reach decisions on. That said, Powell has already learned the hard way — as his predecessors Janet Yellen and Ben Bernanke did early in to their tenures as Fed Chairs — that making sudden movements in front of market participants can often lead to swift (over)reaction. As this has been a measured, languid market, it’s unlikely that Powell will be willing to shake the fish bowl.

On the other hand, there will be the need for deciding on how much longer to keep buying bonds should continue, to say nothing of upping interest rates, in the face of a developing resurgence in the economy as we exit the pandemic era. For this reason, we see Powell’s presser Wednesday as being one of the more anticipated statements on the U.S. economy since the pandemic first hit.

In the meantime, Tuesday morning brings us new Retail Sales figures for May (-0.7% expected from flat the previous month), a fresh Producer Price Index (PPI — expected to tick down to 0.5% from April), Industrial Production (+0.5% estimated) and Capacity Utilization (up slightly to 75.0%). Also, the Empire State Index for June is anticipate to ratchet down a tad to 22.3, still a relatively strong number. These may all play a part in the Fed’s discussions, as well.

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