Major US stock indexes closed the week with growth. The S&P 500 added just under 3% and closed the trading session on Friday at an all-time high of 4,280.7 points. The Nasdaq 100 tech index rose 2.1% over the week and hit its all-time highs, ending trading at 14,345 points. The improvement in investor sentiment was facilitated by the statements of the head of the US Federal Reserve, Jerome Powell, who on Tuesday confirmed his opinion that the rise in inflation in the country is temporary. He also noted that the Fed will continue to support the economy. At the same time, Powell acknowledged the existence of significant uncertainty amid the opening of the economy after the restrictive measures introduced due to the COVID-19 pandemic. However, Powell considers it unlikely that the rate of growth in consumer prices in the country will reach the level of the 1970s, when inflation was in double digits.
Markets were buoyed Thursday by news that Joe Biden had announced a cross-party agreement between Congressmen on a massive infrastructure upgrade package. The President noted that the Democratic and Republican senators had a “really good meeting” at which they eventually managed to reach an agreement. The latest round of talks focused on financing a package of measures that provides incentives totaling $ 973 billion over five years or $ 1.25 trillion over eight years.
The US economy grew 6.4% in the first quarter at an annualized rate, final data from the US Department of Commerce show, in line with market expectations. Previously, GDP growth was also estimated at 6.4%. Meanwhile, the purchasing managers’ index (PMI) in the US industrial sector, calculated by IHS Markit, reached a record 62.6 points in June, up from 62.1 points a month earlier. Not the best news came from the real estate market. Sales of new homes in the United States in May decreased by 5.9% compared with the previous month and amounted to 769 thousand in annualized rates, the country’s Department of Commerce said on Wednesday. The fall in sales was recorded for the second month in a row, while the indicator reached its lowest in the last 11 months.
On Thursday, the Fed announced that the temporary restrictions imposed on banks on dividend payments and buybacks imposed by the COVID-19 pandemic could be lifted after June 30, which supported banking sector shares. The latest stress test showed that the largest US banks have enough capital to weather a severe downturn in the global economy. The Federal Reserve plans on June 28 to announce the final decision on the possibility of resuming dividend payments and the full repurchase of shares by banks.
This week, on Tuesday, the Brussels Economic Forum will begin with the participation of ECB President Christine Lagarde and German Chancellor Angela Merkel. On Thursday, the OPEC + ministerial meeting will be held via videoconference, as well as a speech by Xi Jinping on the occasion of the 100th anniversary of the founding of the Chinese Communist Party. Quite a lot of important macroeconomic indicators will be published in the USA on Friday. It is worth paying attention to the June data package on the labor market, as well as the May data on industrial orders and durable goods orders.