Stocks Face Headwinds On Wall Street After Rallying for Two Months

Barry Adams
20 Jun, 2023
New York City

Stocks struggled to advance after rallying in the previous week and Treasury bond yields traded mixed. 

U.S. financial markets were closed Monday due to the Juneteenth holiday. 

Markets extended rally after the Federal Reserve left its key lending rates unrevised and raised hopes that the monetary tightening cycle is nearing end. 

The S&P 500 index advanced for the fifth week in a row by 2.6% and the Nasdaq Composite index gained for the eighth by 3.2%. 

Much of the market rally is powered by leading tech stocks on the expectations of AI fueled demand for semiconductor chips and software platforms. 

The narrow rally of the last two months has relied on the hopes of rising sales and earnings at tech companies in the hopes that the AI services will lead to the next round of business and consumer spending following the latest cloud computing cycle. 

Investors are hoping that the latest rate hike pause is likely to be extended at the next policy meeting in July and the U.S. economy is resilient enough to avoid recession this year. 

In addition, the sharp fall in energy prices this year has tampered market gains and tech fueled rally has failed to broaden to multiple sectors. 

In overseas news, China trimmed its loan prime rate by 10 basis points for 1-year rate to 3.65% and 5-year rate to 4.2%. 

Despite the marginal rate cuts as expected, market indexes in Hong Kong and Shanghai declined on the worries that the government may need to announce deeper structural reforms to revive the weak economic recovery. 

The Hang Seng index declined 1.5% and the Shanghai Composite index dropped 0.5% after a cabinet meeting on Friday failed to provide additional stimulus measures. 

 

U.S. Indexes & Yields 

The S&P 500 index futures decreased 0.3% and the Nasdaq Composite futures declined 0.4%. 

The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds eased to 3.85%. 

Crude oil increased $0.04 to $71.88 a barrel and natural gas prices increased 1 cent to $2.66 a thermal unit. 

 

U.S. Stock Movers

Alibaba Group Holding Ltd declined 2.2% to $90.10 after the company announced management changes. 

Co-founder Eddie Wu will succeed Daniel Zhang as chief executive of the company.