Last week was a positive one for equity trading, as the Russell 3000 constituents saw a handsome advance, moving the average total return for the year into the green. The small-cap, capitalization-weighted Russell 2000 index, however, has been lagging behind, with only a modest 2.5% increase so far in 2024. The catalyst for the move higher in stocks last week was the Federal Open Market Committee’s decision to leave its target for the Fed Funds rate unchanged at a range of 5.25% to 5.50%.
The FOMC Statement indicated that inflation has eased over the past year but remains elevated, and the committee does not expect to reduce the target range until it has greater confidence that inflation is moving towards 2%. The bond market reacted positively to this news, with the 10-Year U.S. Treasury jumping in price and dipping in yield, while futures wagers continued to target a year-end Fed Funds rate well below current levels. Federal Reserve Board members and Federal Reserve Bank presidents also raised their 2024 estimate for GDP growth to 2.1%, up from 1.4% three months ago, with a slightly higher Core PCE inflation of 2.6%.
Traders believed that a soft landing for the U.S. economy is possible, a notion that Chairman Jerome Powell did nothing to dispel at his press conference following the interest rate decision. The stock of the week was Apple (AAPL), as the Department of Justice and 16 state Attorneys General filed a lawsuit against Apple over allegedly anticompetitive and exclusionary conduct in the smartphone market. The lawsuit aimed to lower smartphone prices for consumers, reduce fees for developers, and preserve innovation.
While the Complaint highlighted some valid points about Apple’s conduct, it failed to acknowledge the reasons for the company’s success. Apple’s legal team is expected to challenge the complaint, but the outcome remains uncertain. Previous disputes with Apple have resulted in agreements that allow the company to maintain its business model, and a similar resolution is expected in this case. Any changes Apple may have to make are unlikely to have a significant impact on the company’s ecosystem or user enthusiasm.
For a more detailed market commentary, including analysis on Apple and other stocks, readers can check out The Prudent Speculator for free stock picks. Overall, last week was a positive one for equity trading, driven by the FOMC’s decision on interest rates and the optimistic outlook for the U.S. economy. Despite some legal challenges, companies like Apple continue to thrive, and investors remain optimistic about the future of the market.
