Notes Along the Path: Market Update for week 20

Gordon Achtermann |

Market Recap

WEEK 20: MAY 13 - MAY 17, 2024

The S&P 500 index rose 1.5% this week, marking the fourth straight weekly gain, as investors were encouraged by signs of easing consumer price inflation.

The benchmark ended at 5,303.17 on Friday, two days after reaching a record close at 5,308.15. The index reached a new intraday high on Thursday at 5,325.49. It is up 5.3% for the month to date and has climbed 11% this year.

The Dow Jones Industrial Average closed above 40,000 for the first time ever on Friday. I mention this because it's all over the news, but it is completely meaningless.

Data released this week showed the US seasonally adjusted consumer price index, a measure of inflation, rose by 0.3% in April, below expectations for a 0.4% increase and following a 0.4% gain in March. Core CPI, which excludes food and energy prices, also rose by 0.3%, right on the consensus estimate and following a 0.4% gain in March.

The US producer price index increased 0.5% in April on a seasonally adjusted basis, which was more than the 0.3% rise expected and compared with a downwardly revised 0.1% decline in March. Still, equities rose as Federal Reserve Chair Jerome Powell said the US economy is performing "very well" with a strong labor market and rising employment and wages, though with some signs of "gradual" cooling.

All but two of the S&P 500 index's 11 sectors rose this week. The advances were led by technology, which climbed 2.9%, and real estate, which rose 2.5%. Other sectors up by more than 1% included health care, communication services, financials and utilities.

The technology sector's gainers included shares of Palo Alto Networks (PANW), which rose 6.9% as the company agreed to acquire International Business Machines' (IBM) QRadar software-as-a-service assets as part of a broader partnership. Also, BofA Securities said Palo Alto Networks is likely to report "solid" fiscal Q3 results due to growth in Next Generation Security, offsetting likely weak firewall trends.

The two declining sectors were industrials, down 0.4%, and consumer discretionary, easing 0.1%.

The industrial sector's decliners included shares of Deere (DE), which shed 2.7%. The company cut its full-year profit outlook as lower shipment volumes dragged down the agriculture and construction equipment manufacturer's fiscal Q2 results.

Bond Market

The change in the yield curve has been glacial. Which is a very good thing. Why?

When bond rates change quickly that means market participants were very surprised by something. Surprise leads to uncertainty. Uncertainty leads to a demand for higher compensation for investing, which means less investment happens. And that would be a bad thing for our future.

Up Next

Next week, April existing home sales are due on Wednesday, followed by April new home sales on Thursday. Other data will include April durable goods orders and May consumer sentiment on Friday.


Stay the course!

All the Best,

Gordon Achtermann, CFP®