A return of animal spirits?

It was another week, and another record high for the S&P 500. Stocks were propelled higher by more trade deal announcements and increasingly bullish sentiments among traders, despite mixed corporate earnings results. The bond market, on the other hand, remained range-bound, with the 10-year yield bouncing around just below 4.50%.

The easing regulatory environment took center-stage last week. In the spirit of increased transparency, the Federal Reserve hosted a special conference on bank regulation and supervision. The event featured speakers from various backgrounds – including AI. But it focused on the messaging from the country’s largest banks, who all emphasized the need, or perhaps desire, for less-onerous rules.

Broader M&A activity also appears to be gaining momentum, potentially signaling increased confidence among business leaders in a more favorable environment, at least from a regulatory standpoint. Last week, regulators approved a large media-company deal, new bank mergers were announced and headlines about a large railroad tie-up gathered steam.

Economic data released last week included initial jobless claims, which were better than expected at 217,000, down from 221,000 in the prior week. The labor market appears to be holding up reasonably well. Existing home sales were also reported and fell to the lowest level of activity for the month of June since 2010. Elevated home prices and mortgage rates continue to weigh on the housing market.  

The Fed meets this week, and most forecasters do not expect a change in interest rates.