Weekly Market Commentary May 20th to May 24th 2024

Due to a lackluster lineup of economic releases, which included New Home Sales, Existing Home Sales, and Fed Minutes, investor anxiety was solely focused on the poster boy of Artificial Intelligence (Nvidia) and their first quarter earnings release. Despite the high expectations, Nvidia did not disappoint as demand for its AI products soared over 400%. In a welcome sign for investors, Nvidia is not alone in outperforming expectations. Bottom line growth for the S&P 500 is up 6% this quarter, far outpacing the 1% growth analysts had expected. Artificial Intelligence has been a central theme for earnings calls, with 40% of the S&P 500 mentioning the technology.

Housing activity continues to slow despite an eagerness to purchase. New Single-Family Home Sales decreased 4.7% to a 634k annual pace last month while purchases in the prior month were revised lower. Existing Home Sales came in at a 4.14 million annualized rate, below the 4.23 million that was expected. This marks the second consecutive month of declines, furthering the evidence that the resale market is struggling for traction amid record prices and high borrowing costs.

Fed Minutes showed officials rallying around a higher for longer rate narrative, despite what they believe is a well-positioned policy rate at the current time. A willingness to tighten policy further was discussed due to disappointing readings on inflation in the first quarter. The market is now anticipating only one 25 basis point cut this year.

Equity investors saw a divergence of results across the various indices as the Dow Industrials sold off, after breaching the 40,000 level, due to continued troubling issues at Boeing. The index finished at 39,053, down 2.3% for the week. The Nasdaq Composite churned to another record high at 16,922, a 1.4% increase, while the S&P 500 closed relatively flat at 5,305. Yields across the curve were slightly higher with the 2-Year U.S. Treasury up 12 bps, finishing the week at 4.95%.

Key economic releases next week include Regional Manufacturing, the second reading of First Quarter GDP, and the Personal Consumption Expenditures (PCE) index.