SPY, QQQ Retreat Off Record Highs to End 1H 2024

The first half of 2024 concluded with Friday's market close, as U.S. stocks touched new intraday highs after favorable inflation news on a key inflation gauge before retreating in afternoon trade. 

Shortly after the opening bell, the SPDR S&P 500 ETF Trust (SPY) followed its benchmark index higher to match 32nd all-time high of the year, making its first-half gain just shy of 15%. SPY ended the day down 0.4%.

The Nasdaq index also marked another all-time high before retreating in afternoon trade as the Invesco QQQ Trust ETF (QQQ), which tracks the top 100 stocks in the index, ended the day down 0.5%.

The bond market proxy, iShares 20+ Year Treasury Bond ETF (TLT) followed a similar path with slight bounce higher to start the day's trading, but a sharp decline for the remainder of the session to end down 1.8%.

Investors had cheered May's Personal Consumption Expenditures (PCE) report, which showed inflation cooling for a second consecutive month at zero increase, but the hotter personal income number of 0.5% may have given investors pause to end the 2nd quarter and first half of 2024.

Equity ETFs turned down midday, shedding earlier gains, in a post-debate market that appeared to take a cue from the U.S. political landscape that reshaped by President Joe Biden's unsteady performance that, according to reports, has Democrats searching for a new White House candidate. 

The Vanguard S&P 500 ETF (VOO) hovered between a dip and unchanged after positive inflation news pushed it and other indexes higher. The Fidelity NASDAQ Composite Index ETF (ONEQ) did much the same by rising in early trading only to fall decidedly lower around 1 pm New York time.

ONEQ Intraday

Source: etf.com

President Biden's debate performance reinforced Democratic Party worries that the 81-year-old isn't fit for a second term and has party leaders searching for a new candidate, according to a variety of news reports, including a Wall Street Journal article in which lawmakers call for immediate discussions over a path forward.

Conservative-leaning ETFs, including the lightly traded Point Bridge America First ETF (MAGA), held on to gains. The Unusual Whales Subversive Republican Trading ETF (KRUZ) added 0.6%. On the other hand, the God Bless America ETF (YALL) lost 0.2. 

The Democratic-leaning Unusual Whales Subversive Democratic Trading ETF (NANC) lost 0.3%.

Donald Trump's Trump Media & Technology Group. Corp. tumbled 7% after earlier gains and appears set to rise for the week.

Markets rose slightly after the opening bell Friday as the Fed's preferred inflation gauge showed cooling inflation. 

The personal consumption expenditures index (PCE) rose by 2.6% year over year, the smallest jump in the annual figure since December 2023. Core PCE, which excludes the volatile categories of food and energy, increased by 2.6%, the smallest rise since March 2021. 

SPY, the SPDR S&P 500 ETF Trust rose over 0.5%, while DIA, the SPDR Dow Jones Industrial Average ETF Trust jumped nearly 0.6%. 

Cooling inflation cheers investors, giving them hope that the Federal Reserve will feel comfortable enough to start cutting rates. Rate sensitive funds like bond and tech ETFs have struggled in a "higher for longer" rate environment that has kept yields high and taken a bite out of corporate profits. 

TLT, the IShares 20+ Year Treasury Bond ETF, slid by more than half a percentage point Friday, as yields on longer-term U.S. Treasurys rose. Bond prices move in the opposite direction of yields. Rising yields on long-term Treasurys usually indicate rising confidence in economic outlook. 

Short-term bond yields fell, sending BIL, the SPDR Bloomberg 1-3 Month T-Bill ETF into the green. VGIT and GOVT, the Vanguard Intermediate-Term Treasury Index ETF and the IShares U.S. Treasury Bond ETF hovered near the flat line. 

QQQ, the Invesco QQQ Trust, which closely follows the tech-heavy Nasdaq, jumped over 0.6%. Other tech ETFs performed well into midday trading Friday on the cooling inflation news.

XLK, the Technology Select Sector SPDR Fund jumped more than 1% while MAGS, the Roundhill Magnificent Seven ETF rose 0.2%. High growth industries like tech perform well in low-rate environments and any possibility of Fed cuts typically send ETFs in the sector on an upward march.