Stock Market Overview – S&P 500 Surges 17% During H1 of 2019

Inflation remains subdued
David Becker
E-mini S&P 500 Index

US stocks were mixed on Friday but the gains in the large cap S&P 500 index allowed the index to experience the best first half since 1997, The benchmark overcame an escalation in the U.S.-China trade skirmish to close Friday up 17% so far this year, its best first-half performance in 22-years. That prolonged the more than a decade long bull market for stocks and erased steep losses that jarred investors at the end of last year. All sectors were higher, led by energy and financials, with consumer staples underperforming on Friday. For the month of June, the best performing sector was materials which notched up gains of nearly 12%. The worst performing sectors for the month was utilities despite declining interest rates.

All Eyes are on Trump Xi Meeting

The G20 highlight is the Trump and Xi meeting Saturday morning.  Ahead of that, Xi held his own series of meetings and his remarks support the view that a trade deal will remain difficult to reach.  He stated that the US would need to stop is sanction on Huawei, otherwise the meeting was a non-starter. Trump for his part has been asked to walk away from any issues that are not in the US’s long term interests.

Consumer Spending is In Line with Expectations

The Commerce Department reported on Friday that consumer spending, which accounts for 66% of US growth, rose 0.4% as consumer’s boosted purchases of motor vehicles and spent more at restaurants and on hotel accommodation. Prior reading for April was revised up to show consumer spending advancing 0.6% instead of the previously reported 0.3% gain. Expectations were for consumer spending to rise 0.4% last month.

Core PCE Slips

The Feds favorite gauge of inflation remains subdued. Personal consumption expenditures price index rose 0.2% last month as a rebound in food prices was tempered by moderate gains in the cost of other goods. The PCE price index increased 0.3% in April. On a year over year basis May PCE price index increased 1.5%, slowing from April’s 1.6% increase. Excluding the volatile food and energy components, the PCE price index climbed 0.2% last month May after a similar gain in April. For the year ending in May, the so-called core PCE price index increased 1.6%, matching April’s rise.

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