Market Recap
U.S. stock indexes declined on Friday as escalating tensions in the Middle East rattled investor sentiment, pushing markets into the red for the week. The S&P 500 and NASDAQ ended with slight weekly losses after two consecutive weeks of gains, while the Dow dropped more than 1% over the same period.
Market and Economic Data Summary
On the trade front, U.S. and Chinese officials met in London earlier last week and reached a preliminary trade framework following several days of negotiations. President Donald Trump announced that China had agreed to supply U.S. companies with magnets and rare earth metals in return for the U.S. not revoking visas for Chinese students. However, China later clarified that it would impose a six-month limit on its rare-earth export license to the U.S.
Economically, the latest inflation data—Consumer Price Index (CPI) and Producer Price Index (PPI)—came in cooler than anticipated, and there were signs of improvement in this week’s softer economic indicators. Treasury yields declined over the week, while expectations for a Federal Reserve rate cut rose slightly.
Inflation Data:
• Consumer Price Index (CPI): Headline CPI rose just 0.1% month-over-month (MoM), under the expected 0.2%. Year-over-year (YoY), it matched forecasts with a 2.4% increase. Core CPI, which excludes food and energy, also rose 0.1% MoM (below the 0.3% expected), and 2.8% YoY (slightly under the 2.9% forecast).
• Producer Price Index (PPI): Headline PPI declined 0.1% MoM, in line with estimates, while YoY rose 2.6%, also as expected. Core PPI rose 0.1% MoM (vs. 0.2% forecast) and 3.0% YoY (vs. 3.1% expected).
• The latest University of Michigan consumer sentiment survey released Friday showed pessimism over the inflation outlook was better in June. One-year inflation expectations plunged to 5.1% from the more than four-decade high of 6.6% reached in May. Long-run inflation expectations, which track expectations over the next five to 10 years, also fell, hitting 4.1% in June, down from 4.2% in May.
Other Economic Indicators:
• NFIB Small Business Optimism Index: Climbed to 98.8 in May from 95.8 in April, ending a four-month slide. The Uncertainty Index also ticked up 2 points to 94.
• Initial Jobless Claims: Held steady at a revised 248K, slightly above the 245K estimate. Continuing claims rose by 54K to 1.956 million—a cycle high—suggesting some softness in hiring.
• Atlanta Fed GDPNow: The Q2 GDP growth estimate remains unchanged at +3.8%.
Treasury Market:
• Yields moved higher Friday following Israel’s preemptive strike on Iran, though overall yields have trended lower over the past week. Treasury auctions for 10- and 30-year bonds saw strong demand.
o 2-year yield: Down ~7 bps to 3.97% (from 4.04%)
o 10-year yield: Down ~9 bps to 4.42% (from 4.51%)
o 30-year yield: Down ~7 bps to 4.90% (from 4.97%)
Federal Reserve Rate Expectations:
• Softer-than-expected CPI and PPI data lifted expectations for rate cuts. According to Bloomberg:
o Odds of a 25-basis-point cut in July rose to 20% from 16%.
o Markets are now pricing in 1.90 cuts in 2025, up from 1.77 a week earlier.
How did oil do?
U.S. crude oil prices jumped more than 7% on Friday, hitting a four-month high following Israeli airstrikes on Iranian nuclear sites. The escalation raised concerns over potential disruptions to global oil supply and reignited fears of inflationary pressure across the broader economy. By Friday afternoon, crude was trading near $73 per barrel, marking a weekly gain of nearly 12%.
How did gold do?
Gold prices resumed their upward trajectory, reaching new year-to-date highs and surpassing previous records set in late April and early May. By Friday afternoon, the precious metal was trading around $3,450 per ounce—up from approximately $3,320 the prior week and significantly higher than the $2,600 level seen at the end of last year.
What’s on the horizon for interest rates?
Markets are expected to turn their attention to Tuesday’s Retail Sales report and remarks from Federal Reserve Chair Jerome Powell following the conclusion of the two-day FOMC meeting. While a rate cut isn’t anticipated—based on current market expectations—today’s developments, including the Israel-Iran conflict and the sharp rise in oil prices, likely reinforce the Fed’s cautious stance.
Crypto News
Walmart and Amazon are exploring the launch of their own stablecoin offerings. These digital currencies could help reduce transaction fees—particularly those tied to credit card networks—and potentially boost customer loyalty.
In response to the news, shares of newly public Circle Internet Group—issuer of USDC, the second-largest stablecoin by market cap—surged over 25% on Friday.
Also drawing attention is the upcoming Senate vote on the GENIUS Act, a proposed bill aimed at establishing a regulatory framework for stablecoins. The vote is scheduled for next Tuesday, June 17.
The Week Ahead:
Economic:
• Monday (6/16): Empire State Manufacturing
• Tuesday (6/17): Retail Sales, Business Inventories, Capacity Utilization, Export Prices, Import Prices, Industrial Production, NAHB Housing Market Index
• Wednesday (6/18): Building Permits, EIA Crude Oil Inventories, FOMC Rate Decision, Housing Starts, MBA Mortgage Applications Index, Net Long-Term TIC Flows
• Thursday (6/19): Continuing Claims, EIA Natural Gas Inventories, Initial Claims
• Friday (6/20): Leading Indicators, Philadelphia Fed Index
Earnings:
• Monday (6/16): Lennar Corp. (LEN)
• Tuesday (6/17): Jabil Inc. (JBL), John Wiley & Sons Inc. (WLY), La-Z-Boy Inc. (LZB)
• Wednesday (6/18): Korn Ferry (KFY), GMS Inc. (GMS), Smith & Wesson Brands Inc. (SWBI)
• Thursday (6/19): -no reports- Market is closed.
• Friday (6/20): Accenture PLC (ACN), Kroger Co. (KR), Darden Restaurants Inc. (DRI), CarMax Inc. (KMX)
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