Last week, America's pre-birthday physical came back mixed. The labor market remains robust and spending is up. The number nobody wants elevated is inflation, which reached a three-year high. Factory orders are the bruise that looks worse than it is; blame aircraft.
- Equities: The S&P 500 Index fell 1.95% and the Nasdaq Composite dropped 4.60%. Small caps and value held up and U.S. stocks beat international.
- Rates and Treasuries: U.S. bonds rallied. The 10-year U.S. Treasury yield eased to 4.37% from 4.51% a week earlier. Falling yields next to falling oil say the inflation scare is cooling even as May's print ran hot.
- Commodities: Crude oil fell about 6% on the week to $69 as the Iran ceasefire held and the war premium drained out of the price. Gold slipped by roughly 2.5% to $4,096.
- The personal consumption expenditures (PCE) index came in at 4.1% in May, the first reading above 4% since 2023. Core PCE, which strips out food and energy prices, hit 3.4%, the hottest since late 2023. Energy did the damage, and it's not done; the spring's oil spike is still feeding into the price of anything moved, made, or heated. In other words, most things.
- Personal income and spending both jumped 0.7%, ahead of forecasts. Strip out inflation and real spending rose a milder 0.3%, and a big piece of that was a $21 billion increase in spending on gas—not exactly a vote of confidence so much as a bill nobody could skip. The saving rate held at 3%.
- Durable goods orders declined 4.5% in May, which sounds like the floor fell out of American manufacturing. The good news is it didn’t. Aircraft orders fell 51.8%, a comedown after somebody bought a fleet of planes in April. Take that out and orders rose 1.3%.
- The final reading of Q1 gross domestic product landed at 2.1%, revised up by half a point. The Atlanta Fed's real-time tracker has Q2 running closer to 3%.
- Consumer sentiment ticked up to 48.9 in June from May's record low of 44.8, almost entirely because of cheaper gas prices. Inflation expectations eased to 4.6% on the year and 3.4% long-run. The whole national mood moved on the price at the pump, even though almost nothing else changed.
- Initial jobless claims fell to 215,000 for the week ending June 20, down 12,000 and below estimates. Continuing claims rose to 1.82 million for the week ending June 13, their highest level in three months. Nobody's getting laid off, but workers already out are taking longer to get hired back