S&P 500 - fresh highs on the horizon?
Yesterday saw another swingy session for US stock indices. All the majors began the day on the backfoot, but subsequently recovered their poise to end near their highs. They were all a touch firmer this morning, with the S&P 500 back above 5,300 in early trade. That places the index within 50 points, or 1%, of its record intra-day high from a fortnight ago. Could the last couple of weeks of pull-back and consolidation have provided the reset required ahead of a rally to take stock indices to fresh record highs? Maybe. But stock market volatility, as measured by the VIX, has also picked up a touch over the last fortnight. One interpretation is that it’s getting back to more normal levels after falling to lows last seen in 2018. Another is that May’s decline was a final downside blow-off ahead of a more protracted rally as the US stock market becomes a riskier place to invest. Perhaps we’ll get more clarity as the month progresses. Certainly, there’s plenty in June to influence market behaviour, with this week’s emphasis on the US employment outlook. Yesterday, the JOLTS Job Openings number fell to its lowest level in three years, having declined steadily since the summer of 2022. Today the ADP private payroll release came in weaker than expected. Then there’s the weekly Unemployment Claims tomorrow and the all-important Non-Farm Payroll numbers on Friday. Maintaining maximum employment is one half of the US Federal Reserve’s dual mandate, and all this data comes ahead of next week’s FOMC monetary policy meeting. The Fed is expected to keep rates unchanged with an upper bound of 5.50%. But the meeting also sees the release of the FOMC’s quarterly Summary of Economic Projections. Here we’ll get an update on what individual FOMC members are forecasting for inflation, the Fed Funds, unemployment and economic growth for this year and beyond. This could provide the clearest insight on where interest rates may be by year-end.
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