Optimism Rules U.S. and Global Stock Markets

Jun 18, 2024
Alexander Garcia
U.S. indexes hovered near record highs, European markets advanced for the second consecutive day after significant losses in the previous week, India indexes traded at new highs, and market sentiment remained weak in China and Japan.

Retail sales in May edged slightly higher from the previous month but rose 2.3% from a year ago, and sales advanced in 9 of the 13 categories. Market indexes advanced to new highs, supported by another day of gains in semiconductor stocks.

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The U.S. indexes headed higher to new highs ahead of the release of retail sales and housing market updates this week. Nvidia, Broadcom, and Apple led the advance in tech stocks. European markets attempted a rebound after sharp selloffs last week. China's improving consumer spending was overshadowed by the deepening malaise in the property sector.

Benchmark indexes traded around the flatline after creating a series of new highs last week amid optimism about economic growth and disinflation. Retail sales and housing market updates are scheduled to be released this holiday-shortened week.

Benchmark indexes are set to advance higher in Friday's trading, and indexes closed at record highs in four previous sessions in a row. Receding inflation expectations, moderating but tight labor market conditions, and steady economic growth are supporting earnings expectations for the current quarter and year. 

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The latest update on producer price inflation raised hopes that overall inflation may finally reach the Fed's target rate of 2% after stalling above 3% for a year. The European Union imposed additional tariffs on electric vehicles made in China. The Bank of Japan is widely expected to hold rates steady and continue to purchase government bonds. 

Produce price inflation slowed in May, and a day ago, a report showed consumer price inflation rose less than expected. Investors bid up stocks in the hope that the waning inflation pressures may give more headroom to policymakers to approve at least one rate cut before the year is over. 

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Benchmark indexes on Wall Street advanced after inflation cooled, and the Federal Reserve held rates steady as expected. European markets continued their climb as France plunged into political turmoil. Weaker-than-expected inflation stoked deflation worries in China. Japan's wholesale inflation accelerated for the fourth month in a row. 

Benchmark indexes advanced after consumer price inflation cooled in May, raising hopes for at least one rate cut before the year's end.

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Investors could be in for a surprise if consumer price inflation fails to budge amid elevated energy costs, and rising costs of shelter and food. Eleven rate hikes in 2022 and 2023 have failed to bring inflation down to 2%, indicating rates are not restrictive enough.

The Federal Reserve is widely anticipated to hold steady on its policy rate range at the end of the two-day policy meeting on Wednesday. Despite multiple rate hikes, the Fed has failed to bring inflation down to its target rate of 2% amid persistently elevated housing costs. 

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Investors on Wall Street looked forward to the release of the Fed's monetary policy decisions and projections. European markets turned cautious after the rise of far-right parties in the latest European Union elections. Japan's first-quarter GDP contraction was smaller than previously estimated.

Stocks struggled in Monday's trading as investors looked forward to the Fed's monetary policy decisions and economic projections and May's consumer price inflation.

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Nonfarm payrolls soared in May, the jobless rate expanded, and wage gains remained inconsistent with the Fed's target rate to achieve 2% inflation.

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The U.S.'s international trade deficit widened to an 18-month high. European bond yields edged higher after the ECB lowered rates by 25 basis points and held out for a restrictive rate policy. China is scheduled to release its international trade data on Friday.