- The S&P 500® was up 6.47% in June, bringing its YTD return to 15.91%.
- The Dow Jones Industrial Average® increased 4.56% for the month and was up 3.80% YTD.
- The S&P MidCap 400® posted 8.96% for the month, bringing its YTD return to 7.90%.
- The S&P SmallCap 600® was up 8.03% in June and had a YTD return of 5.08%.
S&P 500 breadth turned strongly positive in June, as 454 issues were up (with 155 up at least 10%), compared with May’s 124 gainers, which has turned the YTD breadth positive, with 300 up (116 up at least 20%), as all 11 sectors were positive for the month. For June, the S&P 500 total return was up 6.61%, with broad contributions across issues, compared to previous months when high-market-value issues dominated the market; underlying breadth (and contributions) remained negative. That dominance still exists, as the index’s total return was up 16.89% YTD, but without the top 44 issues, the index would be negative YTD, though that 44 was 8 in May. Apple (AAPL) and Tesla (TSLA) were still on top for the month, with Alphabet (GOOG/L) (then Salesforce [CRM]) the largest negative contributor for the month.
Meanwhile, the positive contributions were broad for June, even though they remain highly concentrated YTD. The index is still top heavy, with the top 10 issues accounting for 30.5% of the market value below 20% is more typical). Of note to the top of the market, semiconductor issue NVIDIA (NVDA) joined the USD 1 trillion in market value club this month, as Apple (which set a record at 7.72% of the index) became the first public issue to trade above USD 3 trillion in market value; the other three members of the club are Microsoft (MSFT), Alphabet and Amazon (AMZN).
The IPO market came back to life (with mixed performance) as Mediterranean restaurant CAVA (CAVA) broke the drought; offered at USD 22, opened at USD 45, reached USD 47 and closed the month at USD 40.95. Korean BBQ group GEN Restaurant (GENK) followed with an IPO at USD 12 and closed the month at USD 16.99. Also completing their IPOs were Vesta Real Estate (VESTA), which develops and manages industrial properties in Mexico; Kodiak Gas Services (KGS), a natural gas compression company in Texas; Savers Value Village (SVV), a for-profit thrift store operator; and Fidelis (FIHL), a specialty insurer and reinsurer. July typically is busy for IPOs, and this recent run gives hope for this year (there are typically few IPOs in August).
The U.S. Federal Reserve released its annual banking stress test, which emulated a 10% unemployment rate, a 40% decline in commercial real estate, a 38% decline for house prices and 4.5% minimum capital ratio for 23 big banks (minimum of USD 250 billion in assets: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, among others). The Fed reported all 23 banks had sufficient funds to operate under a severe recession scenario. Of note, the assumed USD 541 billion in potential losses was the USD 100 billion for commercial and residential real estate losses, compared to USD 120 billion for credit cards, implying greater credit exposure. Also in the notes, the Fed estimated that the 23 banks hold 20% of downtown commercial real estate loans held by banks—which means 80% are held by mid-size and small banks, which were not tested and do not have the same global resources (or “too big to fail” classification). Tests for mid-size banks of USD 100 billion-USD 250 billion are conducted in alternating years, and this was not one of them, as the current regulatory review is expected to change the review to every year.
As for July, the headliner is expected to be the Fed, as the FOMC is expected to increase interest rates by another 0.25% on July 26, with the market baking in an 84% chance. The market appears to have accepted another 0.25% after that, but not until either the September 20 or November 1 announcement dates; the first cut now appears to be in Q2 2024, at the May 1 meeting.