naphtalina/iStock via Getty Images

Inflation Cools, S&P 500 Hits Monthly High Amid Tech Buzz

The S&P 500 (SP500) on Friday notched its best weekly advance in over a month, primarily on the back of surprisingly soft inflation data. The headline consumer price index for May came in flat in what was its first unchanged reading since July 2022. The consumer inflation data ended up overshadowing the other major event of the week – the Federal Reserve’s latest monetary policy decision and the release of the updated Summary of Economic Projections, or the so-called dot plot. The central bank kept interest rates steady at a 23-year-high, but also signaled an expectation of only one 25 basis point cut in 2024 from a prior forecast for three such cuts. For the week, the S&P (SP500) added +1.6%, while the Nasdaq (COMP:IND) climbed +3.2%. Conversely, the blue-chip Dow (DJI) fell -0.5%.

naphtalina/iStock via Getty Images

Far from the tree?

“We think Apple Intelligence is going to be indispensable to the products that already play such an integral role in our lives,” CEO Tim Cook said Monday during the keynote at Apple’s (AAPL) annual Worldwide Developers Conference. The new in-house AI system will be integrated across iPhones, Macs and iPads. Apple also announced the integration of OpenAI’s ChatGPT to its voice assistant Siri at no extra cost. Investors initially viewed the developments as Apple playing catchup to rivals, with its shares ending 1.9% lower on Monday. But the stock surged 7.3% on Tuesday after Wall Street praised the new updates that could potentially drive much wider AI adoption.

Outlier or trend?

The Consumer Price Index was unexpectedly flatin May, compared to the 0.1% rise expected and stalling from the 0.3% increase in April, the Department of Labor said. Core CPI, which strips out food and energy prices, also eased somewhat last month, rising 0.2%, compared with +0.3% expected and +0.3% in April. “Both of these inflation measures indicate that inflation is moderating sharply, which is great news for the soft-landing believers,” said SA analyst Damir Tokic, but warned that the report was possibly an outlier caused by falling energy prices and transportation costs. Still, the data was enough for Nasdaq (COMP:IND) and S&P 500 (SP500) to end at record highs on Wednesday.

Dialing back

While the CPI report brought some relief to markets, gains were limited as the Federal Reserve scaled back its expectations for interest rate cuts this year after maintaining its key rate for the seventh time on Wednesday. The Fed now expects just one 25-basis point cut this year, down from the three reductions it penciled back in March. Policymakers emphasized that they require several consecutive months of waning price pressures before contemplating rate cuts, particularly in light of the latest payrolls report. So far this year, the Fed hadn’t received greater confidence that inflation was sustainably heading toward its 2% goal, Jay Powell noted in his press conference.

All clear

In a big win for Elon Musk, Tesla’s (TSLA) shareholders approved his disputed $56B CEO pay package as well as the electric vehicle maker’s reincorporation to Texas from Delaware. The results were announced at the company’s annual shareholder meeting in Austin. The number of votes in favor of the resolutions were not disclosed, but before the official results were announced, Musk said they were expected to pass by “wide margins.” The massive 2018 compensation plan had been voided by a Delaware judge in January, who called it “an unfathomable sum.” Although shareholders voted in favor of the pay package, it must still be approved by the Delaware Court of Chancery.

EV tariffs

A new global trade war could be brewing after the European Commission said it will provisionally impose tariffs of up to 38.1% on Chinese electric vehicle imports starting July, in addition to the bloc’s existing 10% duties. The decision followed the EU’s anti-subsidy investigation into Chinese EVs that looked into whether extra tariffs were warranted. Tesla (TSLA), which produces EVs at its Gigafactory in Shanghai, may be subject to an individually calculated duty rate. Beijing urged the EU to “immediately correct its wrong practices” and continue bilateral talks, warning that it would “take all necessary measures to defend the legitimate rights and interests of Chinese companies.”

Leave a Reply

Your email address will not be published. Required fields are marked *