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June PMI After the Bell: Headed for a Green Week?

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Friday, June 21st, 2024

We’re hoping to finish the trading week in the green. At this moment in pre-market activity, we’re pointed gently in the wrong direction, but essentially devoid of catalysts to move stock indices in either direction.

Based on this — and the fact that we are officially in the summer months of trading, which traditionally come with noticeably lower trading volume — we feel there may be a downward bias, perhaps in the form of light profit-taking. After all, the S&P 500 and the Nasdaq continue to stroll in the neighborhood of all-time highs, and how long can they be expected to stay there without being propped?

Month to date, the Dow and small-cap Russell 2000 are still down. Yesterday took a baby step toward correcting the current bifurcation in the market with the Dow leading Thursday trading, but still far from parity among indices. From one month ago, the Dow is down -1% and the Russell is -3%, while the S&P 500 is +3.5% and the Nasdaq +6%. Now consider that the A.I. trade, which starts and often ends with NVIDIA (NVDA - Free Report) — a member of both Nasdaq and S&P — is +37%. Even Apple (AAPL - Free Report) , also a member of both, is +9% over that time period.

To be fair, we are not completely without data today. S&P Services and Manufacturing PMI for June come out after today’s opening bell. We expect to see growth on both — +54.0 on Services and +51.0 on Manufacturing, above the 50 threshold — but down month over month by 80 basis points (bps) and 30 bps, respectively. Existing Home Sales for May are also due, and market participants should brace for impact in a market with still-strong headwinds. And U.S. Leading Economic Indicators are expected to moderate month over month.

Our final big splash for the markets this month comes next week. A week from today, Personal Consumption Expenditures (PCE) for May come out. The previous print came in at a very cooperative +2.7% year over year on headline, +2.8% year over year core. This is somewhat symbolic, as high “2-handles” are likely not what the Fed means by optimum 2% inflation. That said, PCE data is regularly name-dropped as the Fed’s preferred gauge of inflation, so any figure starting with a “2” with a down-arrow is quite welcome.

Currently, the Dow is -11 points and the S&P is -4, with the Nasdaq -3 points. Plenty of time for a turnaround back into the green, especially if PMI dats comes in more complementary with the “soft landing” the Fed continues to seek. Beyond this, we should probably be cautious about bidding up the A.I. trade at these levels — at least until there’s something that might stoke sentiment in the space further. Happy Friday!

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