Presented by Mark Gallagher
Software stocks were hit hard; Salesforce showed signs of a slowing economy and less software spending from its customers. AI infrastructure firms such as Nvidia continued to move higher.
Quick Hits
- Report releases: Personal income and spending growth slowed in April.
- Financial market data: Software stocks tumbled as companies tightened budgets.
- Looking ahead: This week, the focus will be on the May employment report.
Report Releases—May 28–31, 2024
Conference Board Consumer Confidence Index: May (Tuesday)
Consumer confidence surprisingly improved in May, breaking a three-month streak of declines. The improvement was largely driven by a notable rise in consumer expectations.
-Expected/prior month consumer confidence: 96/97.5
-Actual consumer confidence: 102
Federal Reserve Beige Book (Wednesday)
The Beige Book showed slight or modest growth for most of the 12 districts reporting, with 2 noting no change in activity. Overall outlooks were slightly more pessimistic amid reports of rising uncertainty and greater downside risks of tight credit standards and high interest rates, constraining growth.
Second Estimate of GDP: First Quarter (Thursday)
The second estimate of first-quarter GDP was in line with expectations. As part of the report, we received the Personal Consumption Expenditures Price Index (Core PCE) for the first quarter. The reading, which excludes food and energy, was slightly below expectations at 3.6 percent annualized, versus expectations of 3.7 percent.
-Expected/first-quarter GDP estimate: 1.3%/1.6%
-Actual second first-quarter GDP estimate: 1.3%
Personal Spending and Personal Income: April (Friday)
Personal income and spending continued to rise in April, though both slowed compared with the
previous month.
-Expected/prior personal income monthly change: +0.3%/+0.5%
-Actual personal income change: +0.3%
-Expected/prior personal spending monthly change: +0.3%/+0.7%
-Actual personal spending change: +0.2%
The Takeaway
-Consumer confidence was higher than expected as consumer expectations improved.
-Personal income and spending growth slowed in April.
Financial Market Data
Equity
| Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | –0.49% | 4.96% | 11.30% | 28.19% |
| Nasdaq Composite | –1.09% | 6.98% | 11.82% | 30.37% |
| DJIA | –0.88% | 2.58% | 3.52% | 19.97% |
| MSCI EAFE | –0.05% | 3.87% | 7.07% | 18.53% |
| MSCI Emerging Markets | –3.10% | 0.56% | 3.41% | 12.39% |
| Russell 2000 | 0.04% | 5.02% | 2.68% | 20.12% |
Source: Bloomberg, as of May 31, 2024
U.S equities were mostly lower. Energy, real estate, and utilities were among the top performing sectors. Underperformers included health care, communication services, industrials, and technology. Software stocks were a notable soft spot, with Salesforce, Intuit, ServiceNow, Paycom, and Workday each falling more than 12.9 percent. Salesforce cited a slowdown in the macroeconomic environment and corporate budgets as it just missed revenue estimates at $9.13 billion versus expectations of $9.17 billion, its first top line miss in 18 years.
Fixed Income
| Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | 1.70% | –1.64% | 1.31% |
| U.S. Treasury | 1.46% | –1.85% | –0.22% |
| U.S. Mortgages | 2.00% | –2.12% | 0.50% |
| Municipal Bond | –0.29% | –1.91% | 2.67% |
Source: Bloomberg, as of May 31, 2024
The yield curve saw a slight steepening as consumer confidence rose and the second estimate of first-quarter GDP was in line. The 2-year yield fell 6 basis points (bps), closing the week at 4.89 percent. The 30-year rose 8 bps to close at 4.65 percent and the 10-year increased 5 bps to close at 4.51 percent.
The Takeaway
-Software stocks receded as Salesforce missed sales estimates. Corporations appear to be tightening budgets on the software side.
-The yield curve steepened slightly as short-term yields fell and long-term yields rose.
Looking Ahead
The focus this week will be on the May employment report, which is due Friday. We also expect Institute for Supply Management (ISM) and international trade balance reports.
-The week kicks off on Monday with the release of the ISM Manufacturing index for May. Manufacturer confidence is expected to improve modestly after falling more than expected
in April.
-On Wednesday, we expect the release of the ISM Services index for May. Service sector confidence is expected to improve after falling into contractionary territory in April.
-The international trade balance report for April is expected on Thursday. It is set to increase, due in part to increased imports of goods.
-Finally, on Friday, the employment report for May will be released. Hiring is expected to accelerate after slowing more than expected in April. If estimates hold, the 180,000 jobs that are forecast would represent a healthy level of hiring.
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.
Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com
Authored by the Investment Research team at Commonwealth Financial Network.
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