Stocks retreated from record highs Friday as risk appetite waned amid a political crisis in France and slumping U.S. consumer sentiment. Nevertheless, equities overcame a more hawkish stance from the Federal Reserve to end the week with gains.
The market ended a strong week on a downbeat note. Equities in Europe sold off ahead of the U.S. open after French President Emmanuel Macron's call for a snap election stoked fears that his centrist, pro-business Renaissance party could lose parliamentary seats to the far-right National Rally party or a left-wing coalition.
As for economic news in the U.S., a measure of consumer sentiment unexpectedly fell to a seven-month low as folks continued to struggle with higher prices. The University of Michigan Consumer Sentiment Index for June declined for a fourth consecutive month to 65.6. Economists were looking for the sentiment reading to rise to 72 from 69.1 a month ago.
"Elevated prices and weakening income opportunities caused survey respondents to report souring feelings regarding personal finances," writes José Torres, senior economist at Interactive Brokers. "Lower gasoline prices have failed to help consumer sentiment in the past few months, a significant occurrence considering that the University of Michigan's gauge of shoppers' moods strongly correlates with costs at the pump."
Although stocks struggled Friday, the major benchmarks ended the week with solid gains despite the central bank's rate-setting committee taking a more hawkish turn on Wednesday. The Federal Open Market Committee (FOMC) concluded its two-day meeting with a forecast of just one quarter-point cut to the short-term federal funds rate before year-end.
As of June 14, futures traders assigned a 61% probability to the Fed enacting its first cut to interest rates in September, according to CME Group's FedWatch Tool.
The earnings calendar is comparatively light next week – as is the economic calendar – leaving market participants free to react to scheduled interviews and speeches by seven different Fed officials.
ADBE stock rallies on outlook
Adobe (ADBE) had its best session in four years, jumping 14.5% after the company raised its full-year revenue forecast. The software maker first announced its foray into generative artificial intelligence (AI) a year ago, but investors have been waiting to see if Adobe's Firefly AI tools will help boost top- and bottom-line results.
"We see a decent likelihood that investors are stuck in a Firefly trough of disillusionment currently, and our sense is that monetization could start to gradually build in the second half and into next year," wrote J.P. Morgan analyst Mark Murphy, who lifted his recommendation on ADBE to Overweight (the equivalent of Buy) from Neutral (Hold.)
Adobe stock has been a market-laggard over the past few years, but it's been a buy-and-hold winner for long-term shareholders. Indeed, anyone who put $1,000 into ADBE stock 20 years ago would be very happy with the returns.
As for the major indexes, the blue chip Dow Jones Industrial Average slipped 0.2% to 38,589, while the broader S&P 500 fell fractionally to 5,431. The tech-heavy Nasdaq Composite added 0.1% to 17,688.
Coming up: the earnings calendar is comparatively light next week – as is the economic calendar – leaving market participants free to react or overreact to several scheduled speeches by Fed officials.
