The S&P 500 continues to notch new all-time highs. In last week’s post, I highlighted concerns about stretched valuations, the magnitude of the rally off the April lows, and a lack of confirmation from momentum indicators. While valuation concerns and rapid gains remain, momentum has since caught up—easing some of that initial worry. That said, market breadth continues to show signs of weakness, and I still lean toward expecting a pullback.
Earnings, broadly speaking, have been clearing the low bar—but growth has clearly decelerated compared to recent quarters. So far, stock reactions suggest that earnings beats are being rewarded only marginally, while misses are being punished significantly. Not exactly a bullish signal for markets.
Retail sentiment remains extremely elevated, with FOMO (Fear of Missing Out) clearly back in play. We’re even seeing the return of meme stocks—an echo of 2021.
Economic data wasn’t the primary driver last week, but what we did get was mixed. Leading economic indicators came in below expectations. Housing data remained soft, with both new and existing home sales missing estimates. On the labor front, jobless claims continued trending lower—a strong leading signal. Continuing claims came in below forecasts but remain elevated overall. Outside of earnings, the other key development was progress on trade negotiations. A deal was finalized with Japan, and Europe looks to be next in line.
📅Looking Ahead: Key Economic Data on Deck
This coming week brings some of the most important economic reports of the quarter—data that could either push this rally further or serve as a catalyst for reversal.
Tuesday:
- Job Openings (JOLTS): Consensus expects a slowdown from last month’s figures.
- Consumer Confidence: Forecasted to tick higher.
Wednesday:
- FOMC meeting concludes: Markets are not expecting a cut, but will be interested in his messaging. But perhaps he starts to feel pressured by the white house.
- ADP Employment Data: Often a poor predictor of the official numbers, but still watched.
- Q2 GDP First Estimate: Expected to bounce back to 1.8%, after last quarter’s contraction.
Thursday:
- Core PCE Deflator: The Fed’s preferred inflation gauge. Forecasted to rise slightly to 2.4% year-over-year.
Friday:
- Non-Farm Payrolls: Expected to slow to 115K.
- Average Hourly Earnings: Projected to rise 0.2%, bringing the year-over-year rate to 3.9%.
- Unemployment Rate: Expected to tick up to 4.2%.
If data comes in line with expectations—rising inflation, firm wages, and steady job growth—the Fed is likely to stay on the sidelines for now.
🎙️Join us Friday on Friday Live as we break down all the key numbers and what they mean for your portfolio.
— HPK Provident Advisors
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.