The Markets (as of market close June 26, 2026)
After several weeks of strong gains, Wall Street took a breather as stock traders rotated away from many of this year’s top-performing technology and artificial intelligence stocks. While several major semiconductor companies delivered solid earnings results, profit-taking weighed heavily on the NASDAQ and S&P 500, marking only the second weekly decline for both indexes in the past 13 weeks. Meanwhile, value-oriented sectors such as health care, utilities, real estate, and consumer staples attracted investor interest, helping small-cap stocks outperform for another week. Crude oil prices fell sharply as shipping traffic through the Strait of Hormuz normalized following easing tensions in the Middle East, while Treasury yields also edged lower.
Last Week’s Economic News
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The economy continued to expand. The third and final estimate of first-quarter gross domestic product showed the U.S. economy grew at an annualized rate of 2.1%, an improvement from the 0.5% pace recorded in the fourth quarter of 2025. Stronger business investment, exports, and government spending helped offset slower consumer spending.
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Consumer spending remained healthy, but inflation stayed elevated. Personal income increased in May, while consumer spending also rose by a similar amount. The Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred measure of inflation—increased during the month and over the past year. Core PCE inflation, excluding food and energy, rose year-over-year.
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Housing activity softened. Sales of new single-family homes declined in May, while available inventory increased to a 10.3-month supply, suggesting continued pressure on the housing market despite relatively stable home prices.
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Manufacturing orders pulled back. Durable goods orders fell in May following April’s strong gain. Transportation equipment accounted for much of the decline, while orders excluding transportation posted a modest increase.
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The trade deficit widened. The advance report on international trade showed the goods deficit increased in May as exports declined and imports rose, reflecting softer overseas demand and stronger domestic purchasing activity.
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The labor market remained stable. Initial unemployment claims fell, remaining near historically low levels despite ongoing signs of moderation in hiring activity. Continuing claims increased modestly but remained consistent with a healthy labor market.
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Gasoline prices continued to ease. The national average price for regular gasoline fell, from the previous week, although prices remain higher than one year ago.
Eye on the Week Ahead
Markets will operate on a shortened schedule this week ahead of the Fourth of July holiday, with U.S. markets closed on Friday. Investor attention will be focused on Thursday’s June employment report, which will provide the latest reading on hiring, unemployment, and wage growth. Following several months of resilient labor market performance and elevated inflation, the report could play an important role in shaping expectations for future Federal Reserve policy decisions.
Have a nice week!
Sincerely,
Robert G. Carpenter