The S&P 500 (Index: SPX) receded during the trading week ending 23 June 2023. The index closed the week at 4348.33, down almost 1.4% from the previous week’s closing value.

The trading week had been shortened by the Juneteenth federal holiday, but it was surprisingly active with respect to potentially market-moving news. The big news story of the week was provided by Federal Reserve officials, who emphasized they weren’t yet done with the series of rate hikes they began back in March 2022, despite having taken no action to alter rates in the previous week.

That effort had little-to-no effect on the expectations for how the Fed will set the Federal Funds Rate at its upcoming meetings (more on that below our summary of headlines for the week). But that jawboning may have had an effect on stock prices.

The alternative futures chart shows the level of the S&P 500 receding throughout the trading week wee ending on 23 June 2023. But it still falls well within the redzone forecast range indicated on the chart.

The news of the week was relatively quiet outside of items involving the world’s central banks and how they’re setting the interest rates they control. Here’s the summary:

Tuesday, 20 June 2023

• Signs and portents for the U.S. economy:
  • Oil prices ease on weaker Chinese demand picture
  • New US home construction surges by most in 3 decades in May
  • Supply chain hangover still feeding inflation -SF Fed paper
• Fed minions thinking about maybe overseeing U.S. banks:
  • Fed's Barr says Fed exploring how to speed up bank oversight process
• Bigger trouble, stimulus developing in China:
  • HSBC cuts China's GDP forecast to 5.3% on weak property, business outlook
  • China cuts lending benchmarks to revive slowing demand
  • Marketmind: Still seeking decisive stimulus in China
• ECB minions still excited to keep hiking rates, signs of slower inflation in Eurozone:
  • ECB hawks argue for more hikes even as Lane opens door to pause
  • ECB is data-driven, Sept decision too far off to call - Lane
  • German May producer prices rise at slowest pace in over two years
• Wall Street ends lower, pausing rally as Powell testimony looms

Wednesday, 21 June 2023

• Signs and portents for the U.S. economy:
  • Oil holds steady ahead of Powell's congressional testimony
• Chief Fed minion testifies inflation fight isn't over, claims another half point in rate hikes should be expected; other Fed minion not so sure:
  • Fed's Powell, in testimony, says inflation fight has "long way to go"
    • Powell: Half-point of additional hikes a 'good guess' of policy outcome
    • Powell says U.S. Fed will make "judgment call" on costs of new regulations
  • Atlanta Fed's Bostic: Rates should stay steady from here
  • Fed is taking 'wait and see' approach, Goolsbee says
• BOJ minions starting to worry about inflation, won't end never-ending stimulus soon:
  • BOJ debated risk of being too late in raising rates at April meeting
  • BOJ's Adachi sees only small chance of July policy tweak
• Bigger trouble developing in the Eurozone, ECB minions worry over inflation:
  • German recession will be sharper than expected: Ifo
  • ECB hawks warn over sticky inflation as rate peak nears
• Wall Street extends sell-off as Powell hints at further rate hikes

Thursday, 22 June 2023

• Signs and portents for the U.S. economy:
  • US existing home sales edge up but prices drop by most since 2011
  • Oil plunges 4% as interest rate hikes outweigh lower US oil supplies
  • US banks push back as regulators prepare international capital hikes
• Fed and ECB minions thinking about mopping up "excess" liquidity from decade of quantitative easing:
  • Fed, ECB may slash bank reserves by 90% in new era of high rates - paper
  • Fed's Bowman says more rate increases needed
  • Fed's Powell says rate hikes will come at a "careful pace" from here
  • Investors keep bets on U.S. rates soon topping out, despite Powell's hawkishness
• Central banks minions deliver more rate hikes, BOJ minions want to buck trend:
  • Bank of England delivers hefty rate hike
  • Swiss central bank signals more tightening to come after latest rate hike
  • Norway central bank raises rate to 15-year high, with more to come
  • BOJ policymaker calls for keeping low rates, focus on wages
• ECB minions want savers to get higher interest rates:
  • Recent rate hikes should also be passed on to savers - ECB's De Guindos
• Wall Street ends higher as Powell wraps up testimony

Friday, 23 June 2023

• Signs and portents for the U.S. economy:
  • Oil dips on demand worries as more rate hikes likely
  • US business activity growth slows in June but services keep humming along
• Fed minions trying to set expectations of two more rate hikes before they stop:
  • Exclusive-Fed's Daly: two more US rate hikes a 'very reasonable' projection
• BOJ minions have inflation to worry about forcing them to rethink never-ending stimulus:
  • Japan's inflation stays above BOJ target, key gauge hits 42-year high
  • Japan's factory activity hampered by weak demand - PMI
• ECB minions rate hikes having desired effects:
  • Deepening economic pain leaves ECB in policy dilemma
  • German services sector growth eases in June, manufacturing slumps -flash PMI
• Wall Street ends down, snaps weekly winning streak on Fed worries

A strong effort by Federal Reserve officials to communicate they're not yet done with rate hikes had little to no effect during the week that was. The CME Group's FedWatch Tool still projects the Federal Reserve will hike the Federal Funds Rate by a quarter point just once more to a target range of 5.25-5.50% when it meets on 26 July (2023-Q3). After that, the FedWatch Tool continues to project the Fed will initiate a series of quarter point rate cuts at six-to-twelve-week intervals starting in January 2024, with rates projected to fall to a target range of 3.75-4.00% in December 2024.

The Atlanta Fed's GDPNow tool estimate of the real GDP growth rate for current quarter of 2023-Q2 ticked up to +1.9% from the +1.8% growth rate it forecast a week earlier.

Given the general lack of market moving news during the week, it's possible the S&P 500 is entering its summer doldrums. We'll see if that's what's happening as soon as next week's edition of our S&P 500 chaos series.

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