Yesterday, the S&P 500 and Nasdaq closed in the red as investors decided to take some profits following a strong run for megacap stocks. Additionally, they were preparing for important economic and policy events slated for next week.

Interestingly, while the megacap stocks took a hit, the small-cap index Russell 2000 experienced a 1.78% climb. It seems like investors are shifting their focus away from the megacap and growth stocks after their impressive gains. This trend of small caps outperforming large caps has been noticeable over the past week.

In terms of economic indicators, the U.S. inflation data is expected to show a slight easing in consumer prices for May compared to the previous month. However, core prices are anticipated to remain elevated, which is worth keeping an eye on.

Now, let’s talk about interest rates. The Bank of Canada raised rates, which caused the two-year U.S. Treasury yield and benchmark 10-year yield to increase. This development has sparked concerns among investors regarding the Federal Reserve’s upcoming interest rate decision. According to the CME’s Fedwatch tool, the probability of a rate hike in June has decreased to 69%, with expectations shifting towards a hike in July.

Recently, the U.S. stock market has been boosted by a rally in megacap stocks and a better-than-expected earnings season. The S&P 500 has risen nearly 20% from its October 2022 lows. However, some analysts anticipate that profit-taking might occur soon, particularly in big tech and other major growth stocks.

In other news, the CBOE Volatility Index, often referred to as the VIX, hit its lowest close since February 14, 2020. This indicates that market volatility has been relatively subdued recently.

Moving on to individual companies, Wells Fargo raised its price target on Netflix shares to $500, the highest on Wall Street. This news pushed Netflix’s stock slightly higher. Additionally, the energy index rose by 2.65% due to an increase in oil prices, while the KBW Regional Banking Index reached its highest level since March 29.

Let’s highlight a couple of notable stock movements. Yext Inc saw a significant surge of 38.44% after raising its annual earnings forecast. On the other hand, Campbell Soup experienced an 8.91% decline as it posted a lower gross margin for its fiscal third quarter, primarily due to high commodity and freight costs.

Coinbase shares managed to rebound by 3.20% after hitting a seven-month low. The company’s CEO reassured customers that their funds were safe and criticized the U.S. Securities and Exchange Commission (SEC) over its recent lawsuit. The SEC sued Coinbase, accusing it of operating illegally without proper registration.

Lastly, we have some trading statistics. Advancing issues outnumbered declining ones on the NYSE, with a ratio of 1.58-to-1 in favor of advancers. On Nasdaq, the ratio was 1.27-to-1. Furthermore, the S&P 500 recorded 22 new 52-week highs with no new lows, while the Nasdaq Composite saw 122 new highs and 40 new lows.