Market developments
Equities:
Stocks rallied towards new all-time highs this week as cooling inflation data strengthened expectations for Federal Reserve interest rate cuts in 2024. The S&P 500 Index touched above 5,500, led by technology stocks, while the Nasdaq approached 18,000. As we hit the halfway mark of the year, the S&P 500 Index has extended its 2024 advance to ~15%, with Nvidia leading gains among megacap stocks.
Fixed income:
The Fed’s preferred inflation measure, the PCE price index, showed a deceleration in underlying inflation, boosting investor confidence. Traders now project almost two rate cuts in 2024, with a quarter-point reduction fully priced in by November. However, Federal Reserve officials, including Mary Daly and Thomas Barkin, remain cautious about declaring victory over inflation.
Commodities:
Oil only closed slightly higher this week, despite positive economic news and rising geopolitical tensions. The oil market has been generally bullish in June, rebounding from a weak May. This recovery is attributed to improved summer fuel demand outlook and geopolitical tensions, particularly in the Middle East.