Chart: SPY 1-year daily

The markets pulled back last week, which was not unexpected because a period of consolidation was needed for the market to work its way higher. Again, as long as the HCM-BuyLine® is positive, all pullbacks should be considered buyable. The unrest in Russia has had very little impact on the markets, which is interesting, and we see no reason for the market to get too excited about the weekend events in Russia.

If the market closes up this week, that would put the S&P 500 up over 10% YTD. If history repeats itself, which we think it most likely will, any time the S&P 500 has been up over 10% at the midway point of the year, it has moved about 12% higher by year-end.

U.S. economic growth softened in June, but remained positive, according to the flash PMIs. The S&P Global Flash U.S. Composite PMI fell 1.3 points to 53.0. Although this reading marked a three-month low, the PMI held in expansion territory for a fifth straight month, confirming our view that the U.S. is not in recession currently.

Growth was entirely driven by the services sector, which saw its PMI ease 0.8 points to 54.1. It was still the second-highest reading since April 2022 and well above the consensus for a much larger decline to 53.3. New orders remained strong, boosted by export orders, while the future output index rose to the highest in over a year. Employment grew at a slower pace, due to worker shortages, which contributed to a build-up in backlogs. Input costs accelerated to a five month high, led by higher labor costs, but charge prices rose at a slower pace as businesses wanted to remain competitive.

Manufacturing shrank at a faster pace, as the PMI slumped 2.1 points to 46.3, a six-month low and notably below the consensus of 49.0. Output declined for the first time in four months, while new orders contracted at the fastest pace since December, due to weak demand and sufficient inventories. Future output expectations remained positive, but by the least this year. Input costs shrank at the fastest pace since May 2020, while output prices were essentially flat.