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The second quarter began with stocks making solid gains in April. COVID vaccines became available to more Americans. The federal government and several states pushed forward with reopening after relaxing many of pandemic-related constraints. Economic data was favorable and encouraging. The first-quarter gross domestic product accelerated at an annualized rate of 6.4%, claims for unemployment slowed, 266,000 new jobs were added, and manufacturing expanded. Price inflation expanded, although the Federal Reserve asserted that it would continue stimulus measures, even if inflation reached and exceeded the Fed's 2.0% target. Each of the benchmark indexes listed here posted solid monthly gains, led by the Nasdaq (5.4%), followed by the S&P 500 (5.2%), the Global Dow (2.9%), the Dow (2.7%), and the Russell 2000 (2.1%). Bond prices increased, pulling yields lower. Crude oil prices ended April at $63.50 per barrel after increasing by more than 7.0% from March. The dollar slipped 2.1%, while gold prices rose 3.5%, closing April at $1,788.20 per troy ounce.
Stocks ended May with mixed returns, with the Global Dow (3.59%) and the Dow (1.93%) posting solid gains, while the Nasdaq fell 1.53%. Sector returns varied, with financials, energy, and materials gaining more than 3.0%, while consumer discretionary and information technology dipped more than 2.5%. Long-term Treasury yields decreased marginally, the dollar dropped 1.3%, while crude oil prices continued to climb, gaining nearly 5.0%. Overall, economic data was positive and confirmed that economic growth was accelerating, but not at the pace some may have anticipated. Labor added 266,000 new jobs, well below the nearly 1,000,000 figure some economists predicted. The number of job openings reached its highest level since 2000, which appears to point to a shortage of available workers rather than a slowdown in labor demand. Inflation was the buzzword throughout the month as consumer prices continued to climb, stoking fears that the Federal Reserve would cut back on stimulus measures in place. The personal consumption expenditures price index rose 0.6%, the Consumer Price Index climbed 0.8%, and producer prices increased 0.6%. Nevertheless, Fed officials repeated assurances that the price hikes were temporary due to "transitory supply chain bottlenecks."
Economic recovery continued in June. Stocks closed the month generally higher, with only the Dow and the Global Dow lagging. Tech shares rebounded from a moderate dip in May to push the Nasdaq to a series of record highs in June. Bond prices rose, dragging yields lower. Yields on 10-year Treasuries declined nearly 10 basis points last month. Crude oil prices climbed nearly $7.00 per barrel. Information technology led the sectors, advancing nearly 7.0%, while materials, financials, and consumer staples lost value. The dollar rose, while gold prices dropped. June saw 559,000 new jobs added, with notable job gains in leisure and hospitality, health care and social assistance, and manufacturing. Inflationary pressures may be peaking as supply-chain pressures that had driven commodity prices higher over the past several months may be easing. Lumber prices fell from record highs and retail vehicle prices may have crested as wholesale auto prices slid. Investor confidence may have been boosted in June with the announcement by President Joe Biden of a bipartisan infrastructure spending package.
Overall, the second quarter was a good one for equities. The Nasdaq gained 9.5%, followed closely by the S&P 500 (8.2%), the Global Dow (4.9%), the Dow (4.6%), and the Russell 2000 (4.1%). Real estate, information technology, energy, and communication services all posted quarterly gains of more than 10.0% to lead the market sectors. Year to date, the Russell 2000 is well ahead of its 2020 year-end closing value, followed by the Global Dow, the S&P 500, the Dow, and the Nasdaq.
The yield on 10-year Treasuries fell 30 basis points. Crude oil prices increased $14.17 per barrel, or 24.0%, in the second quarter. The dollar lost nearly 1.0%, while gold prices advanced 3.6%. The national average retail price for regular gasoline was $3.091 per gallon on June 28, up from the May 31 price of $3.027 and 8.4% higher than the March 29 selling price of $2.852.
MARKET/INDEX | AS OF 6/30 |
QUARTERLY CHANGE |
2020 CLOSE | MONTHLY CHANGE | YTD CHANGE |
---|---|---|---|---|---|
DJIA | 34,502.51 | 4.61% | 30,606.48 | -0.08% | 12.73% |
NASDAQ | 14,503.95 | 9.49% | 12,888.28 | 3.88% | 12.54% |
S&P 500 | 4,297.50 | 8.17% | 3,756.07 | 2.22% | 14.41% |
RUSSELL 2000 | 2,310.55 | 4.05% | 1,974.86 | 1.82% | 17.00% |
GLOBAL DOW | 4,001.68 | 4.93% | 3,487.52 | -1.55% | 14.74% |
FED. FUNDS | 0.00%-0.25% | 0 bps | 0.00%-0.25% | 0 BPS | 0 BPS |
10-YEAR TREASURIES | 1.44% | -30bps | 0.91% | -14 BPS | 53 BPS |
US DOLLAR-DXY | 92.34 | -0.95% | 89.84 | 2.55% | 2.78% |
CRUDE OIL-CL=F | $73.51 | 23.92% | $48.52 | 10.31% | 51.50% |
GOLD-GC=F | $1,770.50 | 3.63% | $1,893.10 | -7.18% | -6.48% |
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
The Consumer Price Index climbed 0.6% in May following a 0.8% increase in April. Over the 12 months ended in May, the CPI rose 5.0% — the largest 12-month increase since a 5.4% increase for the period ended in August 2008. Core prices, excluding food and energy, advanced 0.7% in May and are up 3.8% over the last 12 months. Prices for used cars and trucks continued to rise sharply, increasing 7.3% in May. This increase accounted for about one-third of the overall CPI increase. Food prices increased 0.4% in May, the same increase as in April. Energy prices were unchanged in May.
Prices that producers receive for goods and services continued to climb in May, increasing 0.8% after advancing 0.6% in April. Producer prices increased 6.6% for the 12 months ended in May, the largest yearly gain since November 2010 when 12-month data was first calculated. Producer prices less foods, energy, and trade services rose for the thirteenth consecutive month after advancing 0.7% in May. Food prices rose 2.6% and energy prices increased 2.2% in May.
Economic data for the second quarter in general, and for June in particular, was generally positive. Heading into the third quarter of the year, the first estimate of the second-quarter gross domestic product is available in July. The economy accelerated at an annualized rate of 6.4% in the first quarter. Employment data for June is also out this month. May saw 559,000 new jobs added and the unemployment rate dip to 5.8%.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); http://www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
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