S&P 500; US Indexes Fundamental Weekly Forecast – Investors Are Hoping U.S.-North Korea Meeting is Back On

The major U.S. stock indexes closed higher last week, led by technology stocks. The markets were resilient to a number of factors ranging from trade war fears to a softer tone by the U.S. Federal Reserve.

In the cash market, the benchmark S&P 500 Index settled at 2721.33, up 0.30%. The blue chip Dow Jones industrial Average finished at 24753.09, up 0.20% and the tech-driven NASDAQ Composite ended the week at 7435.79, up 1.1%.

Stocks posted a two-sided reaction to news about U.S.-China trade relations. First rallying on optimism generated by the previous week’s meeting then retreating on pessimism because of President Trump’s disappointment with the outcome.

At mid-week, it was the Fed that helped stocks recover from an earlier setback. In the minutes from its May Monetary Policy meeting, the Fed said it would allow inflation to run above its 2.0% mandate. This dovish tone essentially means the central bank will not be as aggressive with rate hikes as previously thought.

On Thursday, stocks broke sharply after President Trump announced the cancelation of the highly anticipated meeting with North Korea President Kim Jung-un. Investors eventually took this news in stride and the markets were able to hold on to their weekly gains despite below average volume ahead of the long U.S. holiday week-end.

Forecast

Stocks seem to be in pretty good shape going into June. However, the current rally doesn’t seem to have the power that buyers exhibited earlier in the year. Higher volatility and rising interest rates may be the reasons for the tentative buying. Nonetheless, stocks are in a position to close higher for the month which is a surprise to some stock market veterans who tend to abide by the old adage, “sell in May and go away.” If the cycle is off then this will give investors something to worry about in the coming months.

Over the week-end, investors received a piece of good news. According to reports, U.S. and North Korean representatives have been meeting all week-end to discuss the terms of the tentatively scheduled June 12 meeting between Trump and Jung-un. Yes that means the meeting may be reinstated.

Stocks could move higher this week if the meeting gets rescheduled. All the investors that bailed when the meeting was cancelled are likely to return to the market. This could give the indexes an early boost. However, there is always the possibility that the meeting will be canceled permanently so don’t think about closing your eyes and buying with both hands yet.

This is also a big week for economic data. Monday is a U.S. holiday so there will be no trading. On Tuesday, investors will get the opportunity to react to the Conference Board’s Consumer Confidence report.

Wednesday will feature the ADP Non-Farm Employment Change report and Preliminary GDP.

The major report for the week is Friday’s U.S. Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show the economy added 190K jobs in May. The Unemployment Rate is expected to remain at 3.9%. Average Hourly Earnings are expected to rise 0.3%.

ISM Manufacturing PMI is expected to come in at 58.2, up slightly from 57.3.