RECAP: for the week ending June 10th, 2016

June 13, 2016

Benchmarks were flat for the week after drops on Thursday and Friday largely erased earlier gains. Standard & Poor’s 500 Index managed to reach its highest level since last July on Wednesday before falling back. The gains also lifted the index to a point roughly 15% above the lows it had reached in February. The technology-heavy Nasdaq Composite Index recorded a loss, and the smaller-cap benchmarks were also relatively weak.

The strong start to the week appeared to be due, in part, to reassuring comments from Federal Reserve Chair Janet Yellen. In a highly anticipated speech on Monday, Yellen confirmed her faith in the strength of the labour market and did not waver in the view that the Fed was set on a path of gradually raising short-term interest rates. Her statements failed to provide the policy insight that many had been hoping for, but T. Rowe Price Chief U.S. Economist Alan Levenson observed that her failure to mention the possibility of a rate hike “in the coming months,” as she had previously, was notable.

Some favorable macro trends may have boosted market sentiment early in the week. Crude oil prices rose above $50 per barrel for the first time in eight months at midweek. The falling U.S. dollar also helped materials and industrial shares, and good news on weekly jobless claims and job openings may have helped fears over the labour market sparked by the previous week’s poor monthly payrolls report.

Global economic worries resurfaced at the end of the week, however, taking stocks lower. Wall Street opened sharply lower on Friday morning, following a big drop in European markets. Growing fears that the UK would vote to leave the European Union were driving this aversion to risk, and oil dropped below $50 after the high during midweek.

 

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