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U.S. investors appeared more than happy to change the calendar to June this week. After the Nasdaq Composite reached correction territory on Monday, stock market averages rebounded more than 2% across the board on Tuesday.
The initial recovery sparked a multi-day rally and the S&P 500 index ended the week 4.4% higher. The rebound was ignited by the realization that the FOMC would be more likely to intervene and cut interest rates, to better reflect market pricing in the Treasury yield curve.
The May jobs data on Friday showed another case where “bad news is good for stocks”. The U.S. added just 75,000 non-farm payrolls last month, which was well below expectations. In addition, the readings from the previous two months were revised down by another 75,000 jobs.
However, this report just added one more feather to the cap of folks looking for interest rate cuts. As a result, Fed funds futures are currently pricing in an 85% possibility of an interest rate cut by July, compared with a 14% chance a month ago.
The Week Ahead
Looking ahead to next week, word late Friday that looming tariffs against Mexico were withdrawn and rumors of a potential merger between Raytheon (RTN) and United Technologies (UTX) could keep the positive momentum rolling.
Broadcom (AVGO) headlines a slow earnings calendar next week. On the economic front, we’ll also get several key readings on inflation. There will be a report on producer prices next Tuesday, followed by consumer prices Wednesday and import/export prices on Thursday.
This week reiterated the fact that market conditions can change in a heartbeat. Six months ago, the FOMC raised interest rates and investors were expecting another two or three rate increases for 2019.
Fast forward to today and markets are now pricing in a 54% chance that we see three interest rate cuts by the end of the year.
Investors that were able to stomach the volatility in May have been rewarded handsomely during the first week of June. The fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such industrial name that’s worth a closer look is our Stock of the Week below…
Stock of the Week: Chart Industries (GTLS)
The company’s business is centered around its cryogenics technology, but has been generating white-hot growth of late. Just this week, management announced a new contract win and reiterated annual guidance.
We recently added Chart Industries to our Smart Investor portfolio and are pleased to see that shares were up 6% this week.
Looking ahead, these gains should keep on coming. Here’s why: