[ad_1]
Stocks Poised to Open Higher
[ad_2]
- Order Reprints
- Print Article
Tag: financial news
-
U.S. stocks end lower, S&P 500 drops third straight week as Fed worries linger
[ad_1]
U.S. stocks ended modestly lower Friday, with the Dow Jones Industrial Average falling for a fourth consecutive day in its longest daily losing streak since June. The S&P 500 and Nasdaq each logged a third-straight weekly decline as rising bond yields rocked equities in the wake of the Federal Reserve meeting on Wednesday.
How stock indexes traded
-
The Dow Jones Industrial Average
DJIA
fell 106.58 points, or 0.3%, to close at 33,963.84. -
The S&P 500
SPX
shed 9.94 points, or 0.2%, to finish at 4,320.06. -
The Nasdaq Composite
COMP
dropped 12.18 points, or 0.1%, to end at 13,211.81.
For the week, the Dow fell 1.9%, the S&P 500 dropped 2.9% and the Nasdaq Composite slumped 3.6%. The S&P 500 and Nasdaq each booked their biggest weekly percentage drop since March, according to Dow Jones Market Data.
What drove markets
Stocks slipped after two days of selling sparked by the Federal Reserve projecting its policy interest rate would remain above 5% well into next year.
The notion in markets that the Fed would be cutting rates soon was “offsides,” leading to a “knee-jerk reaction” in bond markets that hurt stocks, said Michael Skordeles, head of U.S. economics at Truist Advisory Services, in a phone interview Friday. In his view, the central bank may cut its benchmark rate just once in the second half of next year, if at all, as inflation remains too high in a “resilient” U.S. economy with a “still fairly strong” labor market.
Rapidly rising Treasury yields have been blamed for much of the pain in stocks. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
climbed 11.7 basis points this week to 4.438%, dipping on Friday after on Thursday rising to its highest level since October 2007, according to Dow Jones Market Data.Senior Fed officials who spoke Friday voiced support for the more aggressive monetary policy path signaled by Fed Chair Jerome Powell on Wednesday.
Boston Federal Reserve President Susan Collins said rates are likely to stay “higher, and for longer, than previous projections had suggested,” while Fed Gov. Michelle Bowman said it’s possible the Fed could raise rates further to quell inflation. The latest Fed “dot plot,” released following the close of the central bank’s two-day policy meeting on Wednesday, showed senior Fed officials expect to raise rates once more in 2023.
Meanwhile, the S&P 500 finished Friday logging a third straight week of declines, with consumer-discretionary stocks posting the worst weekly performance among the index’s 11 sectors by dropping more than 6%, according to FactSet data.
“Markets weakened this week following an extended period of calm, as the hawkish tone adopted by Fed Chair Powell following the FOMC meeting caused the decline,” said Mark Hackett, Nationwide’s chief of investment research, in emailed comments Friday. “Bears have wrestled control of the equity markets from bulls.”
Economic data on Friday showed some weakness in the U.S. services sector, while manufacturing activity recovered slightly but remained in contraction, according to S&P U.S. purchasing managers indexes.
Still the U.S. economy has been largely resilient despite a hawkish Fed, with “strong economic growth driving fears of continued inflation pressure,” said Hackett. He also pointed to concerns that a “too strong” economy and “developing clouds” such as strikes, a potential government shutdown, and student loan repayments “will impact consumer activity.”
Read: Government shutdown: Analysts warn of ‘perhaps a long one lasting into the winter’
Jamie Cox, managing partner at Richmond, Virginia-based wealth-management firm Harris Financial Group, said by phone on Friday that he’ll become concerned about the impact of a government shutdown on markets if it stretches for longer than a month.
“I’m only worried if it goes past a month,” said Cox, explaining he expects “little” economic impact if a government shutdown lasts a couple weeks.
Meanwhile, United Auto Workers President Shawn Fain said Friday that the union is expanding its strike to 38 General Motors Co.
GM,
-0.40%
and Stellantis NV’s
STLA,
+0.10%
auto-parts distribution centers in 20 states, hobbling the two carmakers’ repair network.“We’re seeing strike after strike,” which overtime could fuel wage growth that’s already “robust,” said Truist’s Skordeles. That risks adding to inflationary pressures in the economy, he said. And while U.S. inflation has eased “dramatically,” said Skordeles, “it isn’t down to where it needs to be.”
Companies in focus
-
Activision Blizzard Inc.
ATVI,
+1.70%
rose 1.7% after the U.K. Competition and Markets Authority said that Microsoft Corp.’s
MSFT,
-0.79%
revised proposals to modify its Activision acquisition makes it possible for the $75 billion deal to be cleared. Under the revised deal, Activision would sell cloud-gaming rights to French videogame publisher Ubisoft Entertainment SA
UBI,
+4.47% ,
whose shares rose in Paris. -
Chinese stocks including e-commerce group Alibaba Group Holding Limited
BABA,
+4.98% ,
electric vehicle-maker NIO Inc.
NIO,
+0.95%
and e-commerce platform JD.com Inc.
JD,
+2.01%
ended Friday with gains. Reports suggested Friday that China is considering a relaxation of rules that limit foreign ownership of publicly traded firms.
Steve Goldstein contributed to this report.
[ad_2]
-
The Dow Jones Industrial Average
-
Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks
[ad_1]
Investors in index funds have been well rewarded by a high concentration in the largest technology companies over the past decade. But there are also continuing warnings about the risk of such heavy concentrations, even in index funds that track the S&P 500. Solutions are offered to limit this risk, but if you expect Big Tech to continue to drive the broad market returns over the coming years, why not make an even more focused bet?
Comparisons of three index-fund approaches highlight how successful concentration in the “Magnificent Seven” has been.
The Magnificent Seven are Apple Inc.
AAPL,
+0.16% ,
Microsoft Corp.
MSFT,
+0.72% ,
Nvidia Corp.
NVDA,
-2.03% ,
Amazon.com Inc.
AMZN,
+2.17% ,
Alphabet Inc.
GOOGL,
-0.27% GOOG,
-0.32% ,
Tesla Inc.
TSLA,
+9.37%
and Meta Platforms Inc.
META,
+1.67% .
We have listed them in the order of their concentration within the Invesco S&P 500 ETF Trust
SPY,
which tracks the S&P 500
SPX.
The U.S. benchmark index is weighted by market capitalization, as is the Nasdaq Composite Index
COMP
and the Russell indexes.SPY is 27.6% concentrated in the Magnificent Seven. One way to play the same group of 500 stocks but eliminate concentration risk is to take an equal-weighted approach to the index, which has worked well for certain long periods. But here, we’re focusing on how well the concentrated strategy has worked.
Let’s take a look at the group’s concentration in three popular index approaches, then look at long-term performance and consider what happened in 2022 as rising interest rates helped crush the tech sector.
Here are the portfolio weightings for the Magnificent Seven in SPY, along with those of the Invesco QQQ Trust
QQQ,
which tracks the Nasdaq-100 Index
NDX
and the Invesco S&P 500 Top 50 ETF
XLG
:Company Ticker % of SPY % of QQQ % of XLG Apple Inc. AAPL,
+0.16% 7.05% 10.85% 12.46% Microsoft Cor. MSFT,
+0.72% 6.65% 9.53% 11.76% Amazon.com Inc. AMZN,
+2.17% 3.30% 5.50% 5.84% Nvidia Corp. NVDA,
-2.03% 3.02% 4.44% 5.33% Alphabet Inc. Class A GOOGL,
-0.27% 2.17% 3.12% 3.83% Alphabet Inc. Class C GOOG,
-0.32% 1.88% 3.11% 3.32% Tesla Inc. TSLA,
+9.37% 1.79% 3.10% 3.17% Meta Platforms Inc. Class A META,
+1.67% 1.77% 3.60% 3.12% Totals 27.63% 43.25% 48.83% Sources: Invesco Ltd., State Street Corp. The same group of seven companies (eight stocks with two common share classes for Alphabet) is at the top of each exchange-traded fund’s portfolio, although the top seven for QQQ aren’t in the same order as those for SPY and XLG. QQQ’s weighting was changed recently as the underlying Nasdaq-100 underwent a “special rebalancing” last month.
Here’s a five-year chart comparing the performance of the three approaches. All returns in this article include reinvested dividends.
FactSet
QQQ has been the clear winner for five years, but it is also worth noting how well XLG has performed when compared with SPY. This “top 50” approach to the S&P 500 incorporates many stocks that aren’t listed on the Nasdaq and therefore cannot be included in QQQ, which itself is made up of the largest 100 nonfinancial companies in the full Nasdaq Composite Index
COMP,
+0.45% .Examples of stocks held by XLG that aren’t held by QQQ include such non-tech stalwarts as Berkshire Hathaway Inc.
BRK.B,
+0.77% ,
Johnson & Johnson
JNJ,
+0.79% ,
Procter & Gamble Co.
PG,
+0.94% ,
Home Depot Inc.
HD,
-0.12%
and Nike Inc.
NKE,
-0.42% .Now let’s go deeper into long-term performance. First, here are the total returns for various time periods:
ETF 3 Years 5 Years 10 Years 15 Years 20 Years SPDR S&P 500 ETF Trust
SPY40% 69% 223% 370% 531% Invesco QQQ Trust
QQQ41% 113% 430% 882% 1,158% Invesco S&P 500 Top 50 ETF
XLG41% 85% 262% 404% N/A Source: FactSet Click on the tickers for more about each ETF, company or index.
There is no 20-year return for XLG because this ETF was established in 2005.
For five years and longer, QQQ has been the runaway leader, but for 5, 10 and 15 years, XLG has also beaten SPY handily, with broader industry exposure.
Something else to consider is that during 2022, when SPY was down 18.2%, XLG fell 24.3% and QQQ dropped 32.6%.
For disciplined long-term investors, the tech pain of 2022 may not seem to have been a small price to pay for outperformance. And it may have been easier to take the pounding when holding SPY or even XLG that year.
Here’s a look at the average annual returns for the three ETFs:
ETF 3 years 5 years 10 years 15 years 20 years SPDR S&P 500 ETF Trust
SPY11.8% 11.0% 12.4% 10.9% 9.6% Invesco QQQ Trust
QQQ12.0% 16.3% 18.2% 16.4% 13.5% Invesco S&P 500 Top 50 ETF
XLG12.2% 13.1% 13.7% 11.4% N/A Source: FactSet So the question remains — do you believe that the largest technology companies will continue to lead the stock market for the next decade at least? If so, a more concentrated index approach may be for you, provided you can withstand the urge to sell into a declining market, such as the one we experienced last year.
Here is something else to keep in mind. In a note to clients on Monday, Doug Peta, the chief U.S. investment strategist at BCA, made a fascinating point: “The only novel development is that all the heaviest hitters now hail from Tech and Tech-adjacent sectors and are therefore more prone to move together than they were at the end of 2004, when the seven largest stocks came from six different sectors. “
Nothing lasts forever. Peta continued by suggesting that investors who are tired of big tech taking all the glory “need only wait.”
“[I]f history is any guide, their time at the top of the capitalization scale will be short,” he wrote.
Don’t miss: These four Dow stocks take top prizes for dividend growth
[ad_2]
-
U.S. oil prices score longest streak of daily gains in over 4 years
[ad_1]
Oil futures settled higher on Wednesday, with U.S. prices posting a ninth consecutive climb — the longest streak of daily gains since early 2019.
Prices for U.S. and global benchmark crude futures marked fresh settlement highs for the year so far, following the recent extension of supply cuts by Saudi Arabia and Russia.
Price action
Market drivers
“Saudi…
[ad_2]
-
Is the Stock Market Open Today? These Are the Trading Hours for Labor Day.
[ad_1]
Is the Stock Market Open Today? These Are the Trading Hours for Labor Day.
[ad_2]
-
Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock
[ad_1]
The Federal Reserve can probably end its inflation fight now that the U.S. labor market is cooling after generating a historic 26 million jobs in roughly the past three years, according to BlackRock’s Rick Rieder.
“In fact, 26 million jobs is like adding an economy the size of Australia or Taiwan (including every man, woman, and child),” said Rieder, BlackRock’s chief investment officer in global fixed income, in emailed commentary following Friday’s monthly jobs report for August.
The August nonfarm-payrolls report showed the U.S. adding 187,000 jobs, slightly more than had been forecast, but also pointing to an uptick in the unemployment rate to 3.8% from 3.5%.
“Remarkably, 22 million people were hired between May 2020 and April 2022, and 11 million were added to the workforce from June 2021 to May 2023, as the economy has opened up massive amounts of roles for fulfillment,” said Rieder.
He expects wage pressures to ease, he said, and thinks the “economy may now have fulfilled many of its needs,” which should make the Fed feel more confident in “the permanence of lower levels of inflation,” so that it can slow or stop its interest-rate rises by year-end.
Hiring in the U.S. has slowed, except in education and in healthcare services, when looking at private payrolls based on a three-month moving average.
Payrolls are slowing in many sectors, expect education and healthcare
Bureau of Labor Statistics, BlackRock
The Fed has already raised interest rates in July to a 5.25%-to-5.5% range, a 22-year high, with traders in federal-funds futures on Friday pricing in only about a 7% chance of a Fed rate hike in September and favoring no hike again at the central bank’s November policy meeting.
Rieder of BlackRock, one of the world’s largest asset managers with $2.7 trillion in assets under management, said he thinks a Fed pause or outright end to rate hikes could calm markets, even if the Fed, as BlackRock expects, keeps rates high for a time.
U.S. closed mostly higher Friday ahead of the Labor Day holiday weekend, with the Dow Jones Industrial Average
DJIA
up 0.3%, the S&P 500 index
SPX
up 0.2% and the Nasdaq Composite Index
COMP
0.02% lower, according to FactSet.The 10-year Treasury yield
BX:TMUBMUSD10Y
was at 4.173%, after hitting its highest level since 2007 in late August, adding to volatility that has wiped out earlier yearly gains in the roughly $25 trillion Treasury market.Read on: This hadn’t happened on the U.S. Treasury market in 250 years. Now it has.
[ad_2]
-
Nvidia’s stock closes at record high, sending AI-chip maker to $1.2 trillion market cap
[ad_1]
Nvidia Corp. shares are back on track to try to turn in their best year ever after closing at a record high Tuesday, as the company reached a $1.2 trillion market capitalization for the first time.
Nvidia
NVDA,
+4.16%
shares rallied as much as 5% on Tuesday to an intraday high of $490.81, and closed up 4.2% at $487.84, while the S&P 500 index
SPX,
+1.45%
gained 1.5%. Last week, shares surpassed the $500 mark for the first time.After an initial show of strength, Nvidia walked back gains following its blowout earnings report last week, when the graphics-processing-units maker topped Wall Street’s data-center sales estimates by more than $2 billion for the quarter, and forecast revenue for the current quarter of more than $3 billion above expectations.
Nvidia also closed above a $1.2 trillion market cap for the first time Tuesday, according to Dow Jones Market data.
In a little more than a year, Nvidia’s market capitalization had increased by close to $1 trillion, adding $925 billion in market cap since 2022’s stock price low, hit on Oct. 14, when shares closed below $113 for the first time since August 2020, according to Dow Jones data.
Last fall, Nvidia’s stock was melting down because it had to replace some $400 million in expected data-center sales to China with equipment that would clear a U.S. ban on AI tech as well as deal with inventory write-downs.
FactSet
Read from Sept. 2022: Nvidia’s ‘China Syndrome’: Is the stock melting down?
Nvidia shares are up 234% year to date, compared with a 17% gain by the S&P 500, and already ahead of their strong 2016 gain of 224%, and back in the running to overcome their best one-year gain of 308% set back in 2001, according to FactSet data.
Nvidia shares were also the second-most active on the S&P 500 on Tuesday, with more than 69 million shares exchanged, second only to Tesla Inc.’s
TSLA,
+7.69%
more than 132 million shares exchanged by the close.For their part, Tesla shares posted a 7.8% gain Tuesday, their biggest one-day jump in five months, following a report that Tesla was launching a $300 million AI computing cluster using thousands of Nvidia GPUs.
Also on Tuesday, Nvidia and Alphabet Inc.
GOOG,
+2.81% GOOGL,
+2.72%
announced that the chip maker’s cutting-edge data-center chips are powering Google Cloud Platform and its PaxML large language model.[ad_2]
-
Investors parked heavy in cash may be making a ‘mistake’, Nuveen says
[ad_1]
Investors sitting on the sidelines in cash and in money-market funds might consider moving into longer-dated bonds sooner rather than later, according to Saira Malik, chief investment officer at Nuveen.
As look at historical returns shows the broader $55 trillion U.S. bond market typically outperforms short-term Treasurys at the end of past Federal Reserve rate hiking cycles since the 1990s.
The bond market produced an average 5.5% three-month rolling return following the last rate hike (see chart) in the past four Fed hiking cycles, while short-term Treasurys returned 2.1%.
This data includes the three-month rolling average performance of bonds in all Federal Reserve rate-hiking cycles since 1990 (1995, 2000, 2006 and 2018) based on the Bloomberg U.S. Aggregate Bond Index and the Bloomberg U.S. Treasury 1-3 Year Index
Bloomberg, Nuveen
Of note, the magnitude of the bond market’s outperformance faded by 12 months versus short-term positions, when looking at the Bloomberg U.S. Aggregate Bond Index’s performance relative to the Bloomberg U.S. Treasury 1-3 Year Index.
“The broad market typically experienced a strong relief rally immediately after the Fed pause and mostly outperformed the following year,” Malik said, in a Monday client note. “This lends further credence to our view that overallocating to cash or short-term government debt could be a mistake — and that investors may want to start closing their duration underweights.”
Individuals can gain exposure to Wall Street bond indexes through related exchange-traded funds, including the iShares Core U.S. Aggregate Bond ETF
AGG
and the SPDR Bloomberg 1-3 Year U.S. Treasury Bond UCITS ETF
UK:TSY3
for short-term Treasury exposure.Fed Chairman Jerome Powell signaled on Friday that additional rate hikes might be needed to keep the U.S. cost of living in retreat, even though rates already sit at a 22-year high and inflation has fallen sharply in the past year, while speaking at the annual Jackson Hole gathering in Wyoming. He also reiterated a vow to keep rates at a restrictive level for a while to keep inflation in check.
Malik pointed to cooling housing inflation as a positive sign on the inflation front. Home buyers have pulling back as the benchmark 30-year mortgage rate hit an average of 7.31%, the highest levels since 2000.
She also expects U.S. economic growth to slow and a “partial retracing” of the 10-year Treasury yield
BX:TMUBMUSD10Y,
following its surge in recent weeks.“Historically, the 10-year yield has peaked within the last few months of the final rate hike in a tightening cycle. We expect this hike will occur at either the September or November Fed meeting, and that the 10-year yield will decline through year-end.” Yields and debt prices move opposite each other.
Related: Pimco emerges as a buyer in Treasury market selloff, says Bond Vigilante theme ‘a bit extreme’
Stocks were higher Monday, with the Dow Jones Industrial Average
DJIA
up 0.5%, the S&P 500 index
SPX
0.3% higher and the Nasdaq Composite Index
COMP
up 0.4%, according to FactSet.[ad_2]
-
U.S. stocks end higher after Fed Chair Powell’s Jackson Hole remarks, S&P 500 snaps 3-week losing streak
[ad_1]
U.S. stocks ended higher Friday after Federal Reserve Chairman Jerome Powell warned the central bank may need to raise interest rates even higher to temper a strong U.S. economy and quell inflation, while assuring investors that monetary policy would proceed cautiously.
How stock indexes traded
For the week, the Dow fell 0.4%, the S&P 500 gained 0.8% and the Nasdaq climbed 2.3%, according to Dow Jones Market Data. The Dow booked back-to-back weekly losses, while the S&P 500 and technology-heavy Nasdaq Composite each…
[ad_2]
-
Nvidia, Lowe’s, Dollar Tree, and More to Watch
[ad_1]
The majority of second-quarter earnings season is over, with a handful of major technology and retail names left to report this week. Economists will be focused on any news from an annual gathering of monetary policy thinkers and practitioners in Jackson Hole, Wyoming.
[ad_2]
-
The S&P 500 is flashing a warning that U.S. stocks are likely headed lower after breaking below its 50-day moving average
[ad_1]
The S&P 500 on Tuesday closed below its 50-day moving average for the first time since March. It could portend more losses for the index, technical analysts said, suggesting that the summertime stock-market selloff isn’t over yet.
After trending lower all session, the index SPX closed down 51.86 points, or 1.2%, to 4,437.86 on Tuesday, its lowest closing level since July 11, according to FactSet data.
It…
[ad_2]
-
Home Depot, Target, and More to Watch This Week
[ad_1]
Home Depot, Target, Cisco, Deere, Walmart, and More Stocks to Watch This Week
[ad_2]
-
The S&P 500 hasn’t seen a 2% daily drop in nearly 6 months. Does this mean a selloff is overdue?
[ad_1]
The U.S. stock market has been conspicuously calm for most of 2023, prompting some analysts to question whether investors might be overdue for a powerful jolt of volatility.
It’s been 113 trading sessions since the S&P 500 has seen a daily drop of 2% or more, the longest such stretch since Feb. 21, 2020, according to Dow Jones Market Data.
The last time the large-cap index fell by 2% or more through the close was Feb. 21, 2023, when the index dropped by 2% exactly. That was nearly six months ago.
Such subdued volatility is perhaps the most pertinent indication of just how much has changed for markets since 2022.
When measured by the total number of 2% swings in either direction, last year was the most volatile for U.S. stocks since 2009. The S&P 500 recorded 46 daily swings of 2% or more in either direction last year, compared with 55 in 2009, Dow Jones data show. Of those, roughly half were down days.
This quiet streak has been good for stocks: Since Feb. 21, the S&P 500 has gained nearly 13%, according to FactSet data. And as of Thursday, it was up more than 18% for the year.
But as August has gotten off to a rocky start, with the S&P 500 and Nasdaq Composite on track to finish lower for the first week of the month following a three-day streak of losses, some are wondering if the market might be overdue for a larger and perhaps more aggressive drop.
To the extent that the market’s past performance can tell investors anything useful about the future, historical data compiled by Dow Jones Market Data show that streaks of relative calm have endured for much longer in the not-too-distant past.
However, investors have often paid the price eventually.
The longest streak in recent memory without a 2% drop for the S&P 500 ended on Feb. 1, 2018 after 351 trading days — nearly 18 months. It encompassed all of 2017, a memorably tranquil year for markets that saw the Cboe Volatility Index fall to an all-time low in single-digit territory.
A few days later, stocks would see one of their biggest daily routs in years during the now-infamous “Volmageddon” episode on Feb. 5, 2018 when the Dow Jones Industrial Average fell by 1,175 points while the Cboe Volatility Index, otherwise known as the VIX, doubled, jumped by a record 20 points from 18.44 to a high of 38.40, FactSet data show.
At the time, it was the biggest daily point decline on record for the Dow. Data also show that the index has traded lower one year after the end of such streaks two out of five times.
Date Streak Ended Length of Streak 6-Month Performance 1-Year Performance 10/08/2014 125 5.74% 2.26% 6/26/2015 179 -1.93% -3.05% 02/01/2018 351 -0.31 -4.09% 10/09/2018 129 -0.07% 1.36% 02/21/2020 124 1.78% 17.05% SOURCE: DOW JONES MARKET DATA
Ryan Detrick, chief market strategist at Carson Group, said stocks might be ripe for a larger pullback in August, although he acknowledged that streaks of low volatility have often persisted for much longer.
“While these periods of low volatility can increase the odds of some type of near-term pull back, these trends can last a while,” Detrick said during a phone interview with MarketWatch.
“We might be overdue for a modest 4% to 6% pullback here, but it makes sense that this low-volatility world we’ve been living in could have legs.”
Detrick noted that 2022 saw the biggest pullback for the S&P 500 since 2008 as the index fell 19.4%, according to FactSet data.
To be sure, the selloff in the bond market was even more intense, with many analysts describing it as the worst year for bonds in decades, if not in the history of modern financial markets.
“The whole apple cart got rocked last year,” he said.
Detrick also noted that August and September tend to be more volatile months for stocks.
“The odds are higher that we could see some seasonal volatility here,” he said. “August isn’t a great month for stocks, but it’s even worse when you’ve had a good year going into it,” he said.
U.S. stocks rebounded on Friday following the release of the Labor Department’s July jobs report. The S&P 500
SPX
was up 0.8% in recent trade, while the Nasdaq Composite
COMP
rose by 1%. The Dow
DJIA
was trading 256 points, or 0.7%, higher at 35,474.[ad_2]
-
U.S. stocks open higher after CPI data shows inflation at lowest in more than two years
[ad_1]
U.S. stocks opened higher Wednesday after data showed the rate of inflation in June slowed to the lowest level since early 2021, fueling hopes that the Fed may be close to being done with its interest rate hikes.
How are stocks trading
-
The Dow Jones Industrial Average
DJIA,
+0.78%
gained 281 points, or 0.8% to around 34,546 -
The S&P 500
SPX,
+1.03%
added 40 points, or 0.9% to about 4,479 -
The Nasdaq Composite
COMP,
+1.36%
rose 158 points, or 1.1% to roughly 13,915
On Tuesday, the Dow Jones Industrial Average rose 317 points, or 0.93%, to 34261, the S&P 500 increased 30 points, or 0.67%, to 4439, and the Nasdaq Composite gained 75 points, or 0.55%, to 13761.
What’s driving markets
Stocks opened higher, while Treasury yields and the dollar were lower after data on Wednesday showed U.S. inflation at its slowest pace in more than two years.
U.S. consumer prices rose a modest 0.2% in June. Economists polled by the Wall Street Journal forecasted an increased of 0.3%. The yearly rate of inflation decelerated to 3% from 4% in the prior month, marking the lowest level since March 2021.
The so-called core rate of inflation that omits food and energy rose a mild 0.2% last month. That’s the smallest increase in almost two years. Wall Street had forecast a 0.3% gain. The annual rate of core inflation decreased to 5% from 5.3% in the prior month.
See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike
The markets have been receiving the CPI print “pretty well,” said Brian Katz, chief investment officer at the Colony Group.
The lower-than-expected CPI data is likely to “prolong the uptrend [in stocks] that we’ve been experiencing this year,” Katz in a call. “As long as we are in this environment where disinflation continues and we have reasonable growth, it is a good environment for risk assets,” Katz said.
Inflation in June fell in a majority of the important categories, most notably housing prices, which had been elevated, according to George Mateyo, chief investment officer at Key Private Bank.
“The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled. But it most likely won’t change their mind to raise interest rates later this month,” Mateyo wrote in emailed comment Wednesday.
Fed fund futures traders are still pricing in an over 90% chance that the Fed will raise its benchmark interest rate by 25 basis points in its meeting later this month.
Still, some analysts are optimistic that the Fed may cease its interest rate hikes.
The inflation print in June “is enough on a standalone basis for the market to put in question the Fed’s dot projections of two additional hikes left this year and consequently pull interest rate volatility down,” according to Alexandra Wilson-Elizondo, deputy chief investment officer of multi asset solutions at Goldman Sachs Asset Management.
“Yet despite the disinflationary trends, the level of Fed funds rate has only risen to levels comparable to inflation. This contrasts with previous hiking cycles when the Fed hiked rates well above inflation. Therefore, we continue to expect that US monetary policy will stay restrictive for longer, but after this print the Fed very well may be done,” Wilson-Elizondo wrote in emailed comment.
There will also be a batch of commentary from Fed officials for the market to contend with on Wednesday. Minneapolis Fed President Kashkari will speak at 9:45 a.m.; and Atlanta Fed President Bostic will make comments at 1 p.m.. Also, the Fed Beige Book will be released at 2 p.m.. All times Eastern.
Companies in focus
-
Shares of ShiftPixy Inc.
PIXY,
-15.90%
plunged almost 22% Wednesday, after the workforce management software company’s public equity offering valued the stock at a deep discount. -
Lucid Group Inc.
LCID,
-11.02%
shares dropped 5.5% after the company said Wednesday that it delivered 1,404 vehicles during the second quarter, while producing 2,173 vehicles at its Arizona facility. -
SunPower Corp.
SPWR,
+7.82%
shares jumped 6.4% Wednesday after Raymond James analyst Pavel Molchanov upgraded the stock to strong buy from outperform.
[ad_2]
-
The Dow Jones Industrial Average
-
Meta, Bank of America, Affirm, AmEx, JetBlue, and More Stock Market Movers
[ad_1]
[ad_2]
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-3beb512f
Source link -
Oil prices end at a 2-week high on reports Saudi Arabia said OPEC+ will do ‘whatever necessary’ to support oil
[ad_1]
Oil futures settle at their highest in two weeks on Wednesday, finding support after Saudi Arabia’s energy minister reportedly said that the kingdom and its allies will do whatever is necessary to support the oil market.
The comments from Saudi Energy Minister Prince Abdulaziz bin Salman at an OPEC+ seminar was reported by a number of news agencies and follows the Saudi’s announcement Monday that it would extend its voluntary production cut by another month, through August.
Tensions…
[ad_2]
-
How a hawkish Fed could kill a baby bull-market rally in U.S. stocks
[ad_1]
It is the notion that the Federal Reserve could deliver a hawkish jolt to markets even if it refrains from raising rates when its two-day policy meeting ends on Wednesday.
There are concerns that such an outcome could spark a turnaround in U.S. stocks, especially if an uncomfortably strong reading on May inflation — due this coming Tuesday just as the Fed’s policy meeting is slated to begin — pushes the central bank toward something even more extreme, like delivering a rate increase on Wednesday despite intimating that it plans to abstain.
The May consumer-price index is forecast to rise 4.0% for the year, down from a rise of 4.9%, while the core index, excluding food and energy prices, is seen easing to a rise of 5.3% from 5.5%.
On the other hand, signs that the economy has weakened and inflation has continued to fade would help the Fed to justify skipping a rate increase in June — as several senior officials have suggested it will — while signaling that a potential hike at its following meeting in July could be the final increase for the cycle.
“Softening U.S. data should support calls that a June skip could eventually turn into a July pause. Next week, most of the data is expected to remain weak or little changed: retail sales could be flat m/m, the Fed regional surveys should remain in negative territory, and consumer sentiment will waver,” said Craig Erlam, senior market analyst at OANDA, in emailed commentary.
See: The Fed’s crystal ball on inflation appears off the mark again. Here’s comes another fix.
Wednesday’s meeting comes at a critical time for the market. U.S. stocks have powered ahead for more than six months, with the S&P 500
SPX,
+0.11%
having risen more than 20% off its Oct. 12 closing low, according to FactSet. Just this past week, the index exited bear-market territory for the first time in a year.The index is up 12% so far in 2023, reversing some of its 19.4% decline from 2022, its biggest calendar-year drop since 2008, according to Dow Jones Market Data.
So far this year, highflying tech stocks have helped to paper over weakness in other areas of the market. This has started to change over the past two weeks, as small-cap and value-stocks have lurched suddenly higher, but there are fears that the Fed could hurt the most interest-rate sensitive technology names if Chairman Jerome Powell hints at rates rising higher than investors presently anticipate.
The so-called “Megacap eight” stocks — a group that includes both classes of Alphabet Inc. stock
GOOG,
+0.16% GOOGL,
+0.07% ,
Microsoft Corp.
MSFT,
+0.47% ,
Tesla Inc.
TSLA,
+4.06% ,
Microsoft Corp.
MSFT,
+0.47% ,
Netflix Inc.
NFLX,
+2.60% ,
Nvidia Corp.
NVDA,
+0.68% ,
Meta Platforms Inc.
META,
+0.14%
— have driven nearly all of the S&P 500’s gains this year, according to Ed Yardeni, president of Yardeni Research, who included his analysis in a note to clients.But since the beginning of June, the Russell 2000
RUT,
-0.80% ,
a gauge of small-cap stocks in the U.S., has risen more than 6.6%, according to FactSet data. The Russell 1000 Value Index
RLV,
-0.15%
has also gained nearly 3.7% in that time. During this period, both have outperformed the tech-heavy Nasdaq Composite
COMP,
+0.16% ,
although the Nasdaq remains the market leader, having risen 26.7% since Jan. 1.Concerns about the Fed’s plans intensified this week after the Bank of Canada delivered a surprise interest-rate hike, ending a four-month pause. The BOC’s decision followed a similar move by the Reserve Bank of Australia, and partly as a result, U.S. Treasury yields rose and tech-heavy stocks tumbled, with the Nasdaq logging its biggest drop since April 25, according to FactSet.
While small-caps held up amid the chaos, the reaction stoked fears that something similar might be in store for markets when the Fed delivers its latest decision on interest rates Wednesday.
Consequences of a ‘hawkish pause’
Stocks could be in for more turbulence if the Fed signals it plans to follow the BOC and RBA with a hawkish surprise of its own. And it wouldn’t necessarily need to hike rates to pull this off, market strategists said.
Emerging signs of complacency in the market could complicate its reaction. That the Cboe Volatility Index has fallen back below 15
VIX,
+1.32%
for the first time since before the arrival of COVID-19 is one such sign that investors aren’t worried enough about a potential selloff, said Miller Tabak + Co.’s Chief Market Strategist Matt Maley.Another analyst likened the potential fallout from a hawkish Fed to the bad old days of 2022.
“If the Fed signals that rates will be going up again, the market playbook could read more like 2022 than what we have seen so far in 2023,” said Will Rhind, the founder and CEO of GraniteShares, during a phone interview with MarketWatch.
Perhaps the biggest wild card is Tuesday’s inflation report. If the numbers come in hot, Powell and his peers could face pressure to hike rates without priming the market first.
For this reason, Rhind believes investors are underestimating the likelihood of a hike next week, even as Fed funds futures currently see a roughly 70% probability that the central bank will stand pat, according to the CME’s FedWatch tool.
And Rhind isn’t the only one. Leslie Falconio, chief investment officer at UBS Global Wealth Management, says the Tuesday inflation report could be a make-or-break moment for markets, summing up fears expressed elsewhere on Wall Street in a recent note to clients.
“We believe another rate increase is on the table, and that the CPI release on 13 June, a day before the Fed decision, will be decisive. In our view, another hike won’t have a material impact on the pace of economic growth,” Falconio said.
What should investors watch out for?
Assuming the Fed does forego a hike in June, there are a few key tells that investors should watch for to determine whether a “hawkish pause” is under way.
Perhaps the most important will be how the Fed handles changes to its closely watched “dot plot.” A modestly higher median dot would send an unmistakable signal to the market that the Fed will continue with its campaign of tightening monetary policy, perhaps to the detriment of the market, said Patrick Saner, head of macro strategy at the Swiss Re Institute.
“If the Fed skips but wanted to avoid the impression of the hiking cycle being done, it would need to include a revision of the dot plot. They could justify that with a more resilient GDP forecast and a higher inflation outlook. So I think it is the dots and then the statement that will be in focus,” Saner said during a phone interview with MarketWatch.
Beyond that, whatever the Fed does or says will likely be viewed through the lens of economic data that is due out next week. In addition to the Tuesday inflation report, a report on May retail sales is due out Thursday, and a on consumer sentiment from the University of Michigan will land on Friday. All these data points could influence investors’ impressions of the state of the U.S. economy, and their expectations for how the Fed will behave as a result.
[ad_2]
-
Palo Alto, Dish Network, C3.ai, EPAM Systems, and More Stock Market Movers
[ad_1]
These Stocks Are Moving the Most Today: Palo Alto, Dish Network, C3.ai, EPAM Systems, and More
[ad_2]
-
U.S. stocks close sharply higher, with tech shares rallying on hopes for debt-ceiling deal
[ad_1]
U.S. stocks ended sharply higher Friday, with the technology-heavy Nasdaq Composite leading the way up, as hopes rose for a debt-ceiling deal in Congress.
The Nasdaq and S&P 500 also closed at their highest levels since August 2022.
How stock indexes traded
-
The Dow Jones Industrial Average
DJIA,
+1.00%
rose 328.69 points, or 1%, to close at 33,093.34, snapping a five-day losing streak. -
The S&P 500
SPX,
+1.30%
gained 54.17 points, or 1.3%, to finish at 4,205.45. -
The Nasdaq Composite
COMP,
+2.19%
jumped 277.59 points, or 2.2%, to end at 12,975.69.
For the week, the Dow fell 1%, while the S&P 500 edged up 0.3% and the Nasdaq advanced 2.5%. The tech-heavy Nasdaq booked a fifth straight week of gains for its longest win streak since the stretch ending in early February, according to Dow Jones Market Data.
What drove markets
Stocks rose ahead of Memorial-Day weekend as investors were encouraged by reports suggesting that Congress was close to a deal to raise the U.S. debt ceiling.
“It’s a little bit of a relief rally on the debt ceiling,” said Ryan Belanger, founder and managing principal at Claro Advisors, in a phone interview Friday.
While Treasury Secretary Janet Yellen says the U.S. could run out of money as soon as June 1 if the debt ceiling is not raised, other projections estimate the federal government may have until the middle of the month.
“I think we’ll all be able to exhale by mid-June, although it will likely be an increasingly volatile market environment between now and then,” said Kristina Hooper, chief global market strategist at Invesco. “Once that drama recedes, I think all eyes will be back on central banks.”
Belanger said that he’s expecting the Federal Reserve may raise its benchmark interest rate by another quarter percentage point in June to battle high inflation.
The Bureau of Economic Analysis said Friday that the personal-consumption-expenditures-price index showed core inflation, which excludes food and energy, rose 0.4% in April. That’s more than the 0.3% increase that economists had expected, as core inflation rose 4.7% year over year from a rate of 4.6% in March.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said inflation appeared to be moving “in the wrong direction” at the start of the second quarter.
Fed-funds-futures traders now see a 65.9% chance of the Fed hiking its rate by a quarter percentage point in June, and a 34.1% probability of a pause, according to the CME’s FedWatch Tool, at last check. In the bond market, two-year Treasury yields
TMUBMUSD02Y,
4.563%
rose 7.9 basis points Friday to 4.587%, according to Dow Jones Market Data.PCE data also showed consumer spending sprang back to life in April, rising 0.8%, the largest gain in three months to surpass expectations, as Americans bought more cars and spent more on services.
“The consumer is hanging in there,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments, in a phone interview Friday. “I don’t think we want to underestimate the ability of the consumer to continue spending, even if they’re spending a little bit less.”
Meanwhile, the U.S. Census Bureau said Friday that orders for manufactured durable goods in the U.S. jumped 1.1% in April. The gain was largely driven by military spending, but business investment rose sharply as well.
Updated GDP data released earlier this week showed the U.S. economy grew at annual pace of 1.3% during the first quarter, above previous estimates.
For now, debt-ceiling optimism and enthusiasm surrounding artificial intelligence are outweighing concerns about the potential for another Fed rate hike, according to Fernandez. “I just don’t think there is the demand destruction that the Fed is looking for at this point in time,” she said, as the unemployment rate remains low.
Fernandez said she anticipates the Fed could pause its interest-rate hikes in June to asses the economy before potentially raising its policy rate again in July.
Technology stocks have helped propel gains this week in the U.S. equities markets, with Nvidia’s stock
NVDA,
+2.54%
surging Thursday on optimism surrounding its AI-fueled outlook for sales in the second quarter.The tech-heavy Nasdaq Composite has soared 24% this year through Friday. “I would be taking profits on the Nasdaq,” said Belanger, suggesting some stocks in the index have become frothy amid the AI buzz.
Companies in focus
-
Marvell Technology Inc.’s stock
MRVL,
+32.42%
surged 32.4% after the chip company said it expected revenue from artificial intelligence to at least double this fiscal year. -
Gap Inc. shares
GPS,
+12.40%
rallied 12.4% after the retailer took Wall Street by surprise and posted an adjusted profit of a penny a share. -
Ford Motor Co. shares
F,
+6.24%
rose 6.2% after announcing that its electric-vehicle owners soon will have access to the more than 12,000 Tesla Inc.
TSLA,
+4.72%
Superchargers in the U.S. and Canada starting next year. -
Workday Inc. shares
WDAY,
+10.01%
jumped 10% after the software company easily topped earnings expectations and brought on a new chief financial officer.
—Steve Goldstein contributed to this report.
[ad_2]
-
The Dow Jones Industrial Average
