S&P 500 Investors Looking for Direction

The Juneteenth-holiday shortened trading week marked the effective end of the second quarter of 2024 for forward-looking S&P 500 investors. Although the calendar quarter itself has another week to run, the expiration of 2024-Q2′s dividend futures contracts on Friday, 21 June 2024 is what closed the books on the quarter.

After setting two consecutive new record highs on Monday, 17 June and Tuesday, 18 June 2024, the S&P 500 (Index: SPX) retreated from its new peak of 5,487.03 after the mid-week holiday. The index went on to drop 0.4% from that high to end the week at 5,464.62, which is still about a 0.6% increase over where it closed in the preceding week.

Right now, as best as we can tell, investors are looking forward to the fourth quarter of 2024 in setting current day stock prices. The latest update of the dividend futures-based model‘s alternative futures chart shows the trajectory of the S&P 500 is tracking within the expected range associated with investors focusing on that distant future quarter.

As 2024-Q3 has effectively begun, it’s a natural time for investors to consider what lies ahead for the direction the S&P 500. The big question remains what will the Fed do with short term interest rates and when. The CME Group’s FedWatch Tool‘s forecast anticipates the Fed will continue holding the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3). The tool forecasts the Fed will start a series of 0.25% rate cuts on that date, which will take place at six-to-twelve week intervals well into 2025 given how expectations changed in the past week.

Meanwhile, the biggest story in the stock market was the rise of Nvidia (NASDAQ: NVDA) to become the biggest company in both the S&P 500 and the world. Here are the week’s marking moving headlines:

Monday, 17 June 2024

• Signs and portents for the U.S. economy:

• US farmers shun buyers, cling to unsold corn as prices slump
• Oil rises 1% on improving demand outlook

Fed minions trying to commit to one rate cut in 2024, but later than market anticipates:

• Fed’s Kashkari says it’s ‘reasonable’ to predict a December rate cut
• Fed’s Harker: one interest rate cut this year my base case

Troubling economic picture developing in China:

• China’s factory output disappoints, property sector stuck in doldrums

• China new home prices fall at fastest clip in nearly 10 years
• China’s property investment slump worsens in January-May

China cbank leaves key policy rate unchanged as expected

Former BOJ minion says no rate hike by BOJ is likely in July:

• BOJ to forgo July rate hike, taper $152 bln per year, says ex-policymaker

ECB minions working to defuse risk to Eurozone from French bonds:

• ECB pays attention to good functioning of markets, Lagarde says, after France spooks investors

• ECB’s Lane sees no need for any French bond rescue
• French election worries rekindle market memories of UK budget rout

S&P closes with new record high; Treasury yields tick upward

• S&P 500, Nasdaq hit record closing highs ahead of data, Fed comments

Tuesday, 18 June 2024

• Signs and portents for the U.S. economy:

• Farmers’ financial pain spills from Kansas wheat fields to Main Streets
• Oil prices stable as demand uncertainty persists

Fed minions trying to send a consistent message about rate cut plans:

• Fed officials steer cautiously toward potential rate cuts
• Fed can be ‘patient,’ needs more good inflation data: Logan
• Fed’s Musalem signals wary approach to cutting rates in debut speech
• “Encouraged” by recent data, Fed’s Kugler eyes rate cut later this year
• Fed’s policy patience warranted amid still-high inflation, Collins says

Bigger stimulus developing in China:

• China’s risky answer to wall of debt is more debt
• China’s property measures give sales a boost, but only in big cities

Current BOJ minions thinking about a rate hike in July:

• BOJ chief Ueda signals chance of July rate hike

Nvidia becomes biggest firm, pushes S&P to another record close; Nasdaq, Dow also gain

• Nvidia eclipses Microsoft as world’s most valuable company

Thursday, 20 June 2024

• Signs and portents for the U.S. economy:

• US labor market, housing data point to slowing economy

BOJ minions signal coming rate hike:

• BOJ deputy governor Uchida signals readiness to raise rates further
• Japan’s June factory activity eases as costs rise, PMI shows

ECB minions looking forward to more rate cuts as Eurozone economy struggles:

• ECB’s Knot backs one or two more rate cuts this year

S&P pulls back after scaling 5,500 for first time, as profit-taking stalls Wall Street rally

• Nvidia’s staggering gains leave investors wondering whether to cash in or buy more
• Nvidia loses top spot to Microsoft after 3% drop

Friday, 21 June 2024

• Signs and portents for the U.S. economy:

• Oil set for second week of gains on signs of improving demand
• Record high prices, rising mortgage rates depress US home sales

Things Fed minions said, summarized:

• Fed hawks and doves: the latest from US central bankers

BOJ minions not sure what to do next:

• Japan’s demand-led inflation slows, clouds BOJ rate hike path

Bigger trouble developing in Eurozone:

• Euro zone business recovery slows sharply in June, PMI shows

S&P, Nasdaq end lower as Nvidia drags the tech sector for second day

We’ll consider NVDA’s newly elevated position within the S&P 500 later this week.

Going beyond the stock market, the Atlanta Fed’s GDPNow tool‘s forecast of annualized real GDP growth rate during 2024-Q2 ticked down a tent of a percent to +3.0%. The GDPNow tool will continue updating its forecast for 2024-Q2′s GDP growth until the Bureau of Economic Analysis releases its first estimate of the quarter’s GDP at the end of July 2024, after which, it will start providing estimates for 2024-Q3′s GDP real growth rate.

Image credit: Microsoft Copilot Designer. Prompt: “A Wall Street bear and bull looking at a map, appearing lost”.