Stock market and macro: June closes with inflation still uncomfortably high

Main angle of the week

• 📊 The S&P 500 closed on Friday, June 26 at 7,354.02 points and the Nasdaq Composite at 25,297.62, with weekly declines of 1.95% and 4.60%, respectively.
• 🧾 The May PCE in the United States confirmed that price pressure remains high: core rose 0.3% month-on-month and 3.4% year-on-year.
• 🛢️ The market heads into July with EUR/USD at 1.1538, Brent at $72.60, and gold at $4,096.30, while the yield on the 10-year Treasury remains a critical benchmark for equity valuation.

What happened this week

Friday closes and breadth

The week ended on a more defensive note in the major indexes. The S&P 500 closed on Friday, June 26 at 7,354.02 points at 23:07 Madrid time. On the weekly balance, it lost 1.95%.

The Nasdaq Composite closed at 25,297.62 points at 23:15 Madrid time. The weekly decline was 4.60%, clearly worse than the S&P 500, a sign of weaker traction in growth and technology.

In Europe, the Euro Stoxx 50 ended at 6,221.55 points at 18:00 Madrid time, with a weekly decline of 1.14%. The IBEX 35 closed at 19,425.30 points at 17:35 Madrid time and fell 0.45% in the final session. The relative picture continues to favor Europe over U.S. technology in the very short term.

Breadth also deteriorated. The Nasdaq’s performance relative to the S&P 500 was weaker during the week, and that usually points to a more selective market ahead. The Russell 2000 appeared in Yahoo’s market table with a weekly gain below the recent prior stretch and without clear leadership over the large indexes, while the VIX remained around 17.68 in the latest visible reading, far from stress levels, but no longer in extreme complacency territory.

The most relevant macro data point

The most important data point of the week was the May personal income and outlays report in the United States, published on Thursday, June 25. Core PCE rose 0.3% month-on-month and 3.4% year-on-year, versus 3.3% previously.

The figure matches consensus, according to the Trading Economics calendar for June 26, but offers no real relief to the Federal Reserve. Underlying inflation remains too far from 2% and, moreover, accelerated on an annual basis.

The same release showed a 0.7% increase in disposable personal income and a 0.7% increase in personal consumption expenditures. That balance between firm demand and persistent inflation explains why the market is still accepting growth, but pricing in less room for quick rate cuts.

Cross-asset and relative valuation

In currencies, EUR/USD was trading at 1.1395 at the close of the European week. In commodities, Brent closed at $73.42 and gold at $4,096.30. The former reflects a more contained geopolitical premium than in previous weeks. The latter continues to act as a hedge against inflation and international tension.

In rates, the 10-year Treasury benchmark was moving around 4.86%. If a valuation of 25.83 times earnings is taken as an approximation for the S&P Global universe as a recent market reference, the earnings yield is around 3.87%. That leaves an implied risk premium versus the Treasury close to -0.99 percentage points. That negative ERP means equities offer an earnings yield below the bond yield, a combination that requires solid growth to sustain multiples.

What could move the market next week

Corporate earnings: a low-intensity week

The week from Monday, June 29 to Friday, July 3 features a very light earnings schedule among the major listed companies followed by the market. The Yahoo Finance earnings calendar and the Nasdaq calendar do not show any meaningful concentration comparable to peak earnings season.

That shifts the focus from earnings to macro, bonds, and commodities. In a shortened week in the United States, the market tends to overreact more to any surprise in data or rate expectations.

Base case (60%): the absence of major earnings leaves the indexes moving on macro factors and sector rotation. Bullish scenario (20%): the lack of negative catalysts allows stabilization after the weekly correction. Adverse scenario (20%): any isolated profit warning or revision to expectations weighs more than usual due to the lack of reference points.

Macro

Next week’s calendar is indeed dense. The macro calendar lists for Tuesday, June 30 China’s official PMIs and the start of the ECB forum. For Wednesday, July 1, it shows the U.S. ISM manufacturing index. For Friday, July 3, it lists the U.S. employment report with a forecast of 172,000 nonfarm payrolls, versus 114,000 previously, and an unemployment rate of 6.3%.

It is a highly sensitive combination because it brings together activity, employment, and central bank messaging in just four effective sessions. If the ISM rebounds and employment surprises to the upside again, the market may put renewed pressure on the long end of the curve.

Base case (50%): solid but not extreme data, with long-term rates stable and equities moving in a range. Bullish scenario (25%): weak ISM without a sharp deterioration in employment, reopening expectations for rate cuts and supporting duration and growth. Adverse scenario (25%): strong employment with inflation still elevated, which would push yields higher and particularly pressure technology.

Geopolitics

The geopolitical variable continues to come through oil. The clearest precedent is that OPEC+ agreed in early May to a modest increase in quotas for June, of 188,000 barrels per day, according to information compiled by Bloomberg based on the decision communicated by the group. Although that move is already priced in, the market will remain alert to any signal about supply for July.

The other derivative lies in the tone in the Middle East and its impact on energy risk premiums. With Brent at $72.60, the market is pricing in limited disruptions. If that assumption changes, the reaction would be swift in crude, breakeven inflation, and defensive sectors.

Base case (55%): continuity without material escalation and Brent fluctuating near current levels. Bullish scenario (15%): further easing and lower crude, supporting consumption and small caps. Adverse scenario (30%): renewed tension or a less accommodating supply message, with oil rebounding and pressure on bonds and European equities.

Conclusion

The end of June leaves a fairly clear reading. U.S. equities remain expensive relative to bonds when looking at the implied risk premium, and that valuation requirement means growth must hold up and inflation must not surprise to the upside again. The Nasdaq’s weekly correction relative to the S&P 500 deserves attention because it is often one of the first signs of fatigue in the most demanding stretches of the market. Europe is arriving in somewhat better relative shape, but it is not insulated either if long-term U.S. rates start rising again. The base case for the week from June 29 to July 3 is consolidation, with absolute focus on ISM, employment, and the reaction of the 10-year Treasury.

That base case would be invalidated if the employment data on Friday, July 3 comes in clearly above expectations and is combined with a further rise in yields, or if a geopolitical shock strongly pushes Brent higher. In that case, the most likely punishment would fall on long-duration technology and assets with more stretched multiples. Reasonable hedges continue to include gold, prudent dollar exposure, and, for tactical profiles, sectors with visible cash flow and lower duration sensitivity. If, on the other hand, the data moderates without a sharp deterioration in growth, the window for equity stabilization would remain open at the start of July.

This article is general financial information and does not constitute investment advice.