Equities search for direction near all-time highs. Following a sharp rally to start the month of June, the S&P 500 Index has recovered most of its losses from May and now sits just 2% below all-time closing highs. The technicals continue to support our preference for large-caps over small caps, as the Russell 2000 Index remains more than 11% off its all-time highs, and has trailed the S&P 500 by approximately 300 basis points (bps) over the past month.
Retail sales climb. Retail sales increased 0.5% month-over-month in May, rising for the second time in three months. Eleven of 13 components climbed in the month, led by a 1.4% increase in non-store retail sales and a 0.7% increase in motor vehicle and part sales. Consumer spending is an important part of the U.S. economy, accounting for about 70% of gross domestic product. Retail sales have slowed over the past several months as U.S. consumers have processed several trade and political headwinds, but we expect a solid labor market and healthy wage growth to sustain consumer activity over the long-term.
5 things to watch. With the S&P 500 about 2% away from all-time highs, we have several interesting developments taking place under the surface. Later today on the LPL Research blog we will take a closer look at the surprising strength in various global equity markets, market breadth showing no signs of slowing down, the average investor still quite pessimistic, the yield curve, and if the Federal Reserve would really cut rates next week.
LPL on CNBC. Chief Investment Strategist John Lynch was on CNBC Squawk Box this morning to discuss the current state of markets and the economy. You can watch the whole interview here.
- Retail Sales (May); Cons: 0.6%, LP: -0.2%
- Industrial Production (May); Cons: 0.2%, LP: -0.5%
- University of Michigan Sentiment Index (Preliminary, Jun); LP: 100
- Japan Industrial Production (Apr)
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