Stock Market Rallies as Bullish First Half Draws to a Close on Positive PCE

Stock Market Rallies as Bullish First Half Draws to a Close on Positive PCE

by

FOMC

In a positive end to the first half of 2023, U.S. equity futures rose steadily, supported by encouraging inflation data that indicated a continued easing trend. The Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index displayed signs of easing inflation. 

This closely monitored gauge, of particular interest to the Federal Reserve, showed a 0.3% increase in May, aligning with Dow Jones estimates. It also showed US inflation at its lowest point since April 2021. The PCE deflator fell to 3.8% year over year compared to 4.3% in April, and core PCE deflator fell to 4.6% against 4.7% the prior month.

The Dow Jones Industrial Average futures gained +0.57%, while the S&P 500 futures gained +0.7%, and Nasdaq 100 futures surged by +1.1%.

Pre-market trading showed Apple shares rising by more than +1.3%, sending the company’s market capitalization above $3 trillion — it’s the only stock in the market to have reached this milestone this far. Conversely, Nike shares dipped approximately -2.23% after the apparel giant reported worse-than-expected quarterly earnings.

Investors are eyeing Friday’s market performance closely as it not only marks the end of June but also concludes the second quarter and the first half of the year. 

June Performance: The S&P 500 has achieved a 5.18% gain, positioning it for its strongest monthly performance since January. The Nasdaq has advanced by 5.07%, marking the fourth consecutive positive month for both the Nasdaq and the broader market index. The Dow has climbed 3.69%, on track for its most impressive month since November.

Second Quarter Performance: The S&P 500 has risen by +7%, indicating a third consecutive quarter of gains. The Nasdaq has recorded an impressive gain of +11%, marking two consecutive positive quarters. The Dow has jumped +2.5%, positioning itself for a third winning quarter.

Year-to-Date and First Half Performance: The S&P 500 has surged by +15%, delivering its most robust first half since 2018. The Nasdaq has experienced a remarkable surge of nearly +37.5%, setting it on track for its strongest first half since 1983, and making it the clear outperformer despite the naysaying of many value-focused investors. The Dow has achieved a more modest gain of +3%.

The three major averages are also poised for weekly gains, with the S&P 500 and Dow both up over 1%, while the Nasdaq is set to increase by 0.7%.

In short: While economic data has been strong, the Fed has consistently exceeded expectations regarding the extent of its tightening measures, and has been successful in its fight against inflation thus far. While the phrase “soft landing” was the butt of many jokes in 2022, it’s now the most likely scenario, as market sentiment and economic sentiment both continue to tick higher.

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