Weekly Market Commentary – 5/19/2023

-Darren Leavitt, CFA

Investors were treated to a week of gains for US indices, while US Treasuries fell significantly across the curve. Early in the week, there was cautious optimism around debt ceiling negotiations as both sides agreed to the need for bipartisan talks. Mega-cap technology continued to lead the market, with Google, Nvidia, Microsoft, and Meta all making new 52-week highs. Newmont’s 19-billion-dollar takeover announcement of Newcrest and Oneok’s 18.8-billion-dollar acquisition of Magellan Midstream fostered positive sentiment. Similarly, the statement that the UK had approved Microsoft’s takeover of Activision aided the tone.

On the other hand, Fed rhetoric pushed back on the notion that the Fed was done with its rate hiking cycle. Dallas Fed President Logan suggested that recent data did not support a pause in June. Chairman Powell echoed his post-FOMC meeting remarks on Friday at a speech in Washington that reiterated the Fed’s mandate of 2% inflation and left the door open to more rate hikes. Investors also had to contend with the announcement on Friday that debt ceiling negotiations had ended without a resolution and the recognition that both sides were still nowhere near an agreement. President Biden amended his plans for the G7 meetings to return to Washington on Sunday, hoping to restart the negotiations on Monday.

The S&P 500 gained 1.6%, the Dow added 0.4%, the NASDAQ climbed 3%, and the Russell 2000 jumped 1.9%. It was an ugly week for Treasuries as investors contemplated if the Federal Reserve was finished with hiking rates and a debt ceiling compromise could be forged. The 2-year yield increased by twenty-nine basis points to 4.27%, and the 10-year yield rose by twenty-three basis points to 3.69%. Interest-sensitive sectors- Utilities and Real Estate sold off with Treasuries.    Oil prices gained 2.2% or $1.60 to close at $71.76. Gold prices fell by $36.90 to $1981.80 an Oz.  Copper prices closed unchanged for the week at $3.73 a Lb. The US Dollar traded slightly higher on the week.