The return of the U.S. consumer wasn’t enough to drive equities out of their weekly doldrums -- not with a Federal Reserve meeting looming and European leaders still wrangling over Greece’s debt.
Stocks tracked by the Standard & Poor’s 500 Index finished the five days little changed. The gauge’s seventh straight week with a move of less than 1 percent wasn’t without drama, as equities began the period with the biggest three-day slide since March, only to rebound with the best gain in a month.
While higher retail sales and a surge in confidence indicated American consumers got their mojo back and bolstered optimism in the economy, the specter of higher interest rates and the threat of Greek default kept equities in check. The run of weekly calm could end as Fed officials prepare to issue new forecasts for the economy and the path of rates, while Greece has less than a week to accept the conditions for aid.
“There are some overriding currents with Greece and the Fed next week that could change the direction of the market,” said Walter Todd, who oversees about $1 billion as chief investment officer for Greenwood Capital. “The economic data has been better than expected here. We view that obviously as a positive for the economy and the market overall.”
While the S&P 500 is trading in the smallest range since at least 1995, with the 2015 low only 6.5 percent below its year-to-date high, options traders are speculating equity swings will return, with many bracing for disturbances in the next six days, judging by the most popular hedges against S&P 500 volatility. That period includes the two-day Fed gathering.
The Fed is not expected to raise rates, though economic reports since the central bank’s last meeting have pushed the probability for tightening in September to 53 percent, according to data compiled by Bloomberg.
The yield on 10-year Treasury notes touched the highest level since October in the week in anticipation of higher borrowing costs this year. Chair Janet Yellen may provide clues on the pace of tightening when she holds a press conference following the Fed meeting on June 17.
“We could see some jaw-boning by the Fed to prepare the markets for an eventual rate increase,” Chris Gaffney, president of EverBank World Markets Inc. in St. Louis, said in a telephone interview. “The data this week has all been pretty good.”
The University of Michigan’s preliminary consumer sentiment index for June topped all estimates in a Bloomberg survey of economists, while retail sales surged 1.2 percent in May. The gains bolstered speculation the economy is strong enough to withstand higher borrowing costs.
However, the data weren’t enough to push the S&P 500 back to record levels, as the gauge finished the week 1.7 percent below its May 21 high. The index has gone 15 trading days without a record. It has averaged about five days between records since it topped its 2007 high in 2013.
After four months of negotiations, Greece and its creditors ended the week at a renewed impasse with the euro area due to withdraw its financial safety net at the end of the month. German Chancellor Angela Merkel urged the country to accept the framework for financial aid, while International Monetary Fund negotiators left talks earlier in the week.
“There’s a lot of noise along the way, certainly it looks negative that the IMF pulled their negotiators out of there, but at the end we believe the Greek crisis will work itself out,” Gaffney said.
Seven of the 10 main S&P 500 groups advanced in the week. Financial stocks got a boost from higher interest rates, rising 1 percent to lead gains. Utility shares, sought by some investors for their high dividend yields, slumped 0.5 percent.
Citrix Systems Inc. climbed 8.5 percent after an investor called for an overhaul to the software company. Jesse Cohn of Elliot Management Corp. said the company should consider selling two of its units, expand its share buyback and recruit more talented managers.
Energy producers dropped 0.9 percent. Transocean Ltd. lost 7.3 percent to lead a slump among offshore drillers after Barclays Plc’s investment-banking unit initiated coverage of the group with a negative outlook, in part citing low oil prices and an oversupplied rig market. Shares in energy companies also slipped amid concerns about a record pace of production from OPEC’s biggest members.
Airlines slumped 3.6 percent in the week after American Airlines Group Inc. joined Delta Air Lines Inc. in saying its benchmark revenue gauge will decline more than forecast as domestic demand decreases. Southwest Airlines Co. slid 5.8 percent and Delta lost 4.1 percent.