U.S. Stocks Traded Down, International Deficit Shrank, Powell Talks Tough On Inflation

Barry Adams
28 Jun, 2023
New York City

Stocks opened lower after a surge in several sectors in the previous session as investors chase market rally. 

The S&P 500 index and the Nasdaq Composite index are set to close higher in the first-half following AI-fueled tech rally. 

The Nasdaq index is up 29% in the year so far, its best first-half performance in four decades and the S&P 500 index is up 14%. 

Market optimism was also supported by the strength in the housing market and despite rising interest rates and elevated home prices, new home sales expanded in May. 

Investors are looking ahead to comments from central bankers at a gathering in Portugal and get deeper insights in broader economic trends, health of the U.S. economy and rate path. 

European Central Bank President Christine Lagarde, Federal Reserve Chair Jerome Powell, Bank of Japan Governor Kazuo Ueda and Bank of England's Andrew Bailey are scheduled to participate in the forum.  

Despite multiple rate hikes in the U.S., Europe and European Union, rates are still lagging inflation and not restrictive enough. 

Policymakers have argued that rates have lagging effect on the economy and full impact of rate hikes have not been felt yet and central bankers are still not sure whether additional rate hikes are needed. 

Fed Chairman Powell said rates may be revised higher at next policy meetings because of "a very strong labor market" and cautioned "it's certainly possible" that the U.S. economy may see "a significant downturn."

 

Mortgage Applications Edged Higher 

Mortgage loan application volume increased 3% on an adjusted basis from the previous in the week ending June 23.  On an unadjusted basis, application volume declined 8%. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less increased to 6.75%, an increase of 2 basis points from the previous week. 

Despite the recent rebound, mortgage application for a new home declined 21% and refinance dropped 32% from a year ago. 

 

U.S. International Goods Deficit Shrank

U.S. international goods trade deficit declined 6.1% to $91.1 billion from $97.1 billion, the U.S. Census Bureau reported Tuesday. 

Exports in May declined 0.6%, reflecting 14.2% decline in food, feed and beverage exports and 3.0% fall in industrial supplies. 

Imports dropped 2.7%, reflecting a decline in purchase of consumer goods by 7.3% and 5.9% fall in industrial supplies. 

 

U.S. Indexes & Yields 

The S&P 500 index increased 1.1% to 4,380.21 and the Nasdaq Composite rose 1.7% to 13,559.48.  

The yield on 2-year Treasury notes increased to 4.75%, 10-year Treasury notes inched lower to 3.75% and 30-year Treasury bonds edged down to 3.83%. 

Crude oil increased $0.94 to $67.85 a barrel and natural gas prices increased 4 cents to $2.79 a thermal unit. 

 

U.S. Stock Movers

Chip stocks were in focus on the worries that the U.S. may impose more exports restrictions to China including a ban on sale of AI chips. 

Nvidia Corp declined 2.2% to $409.98, AMD dropped 1.6% to $108.57 and Intel Corporation fell 2.5% to $33.23. 

General Mills Inc declined 4.4% to $77.16 after the food company reported weaker than expected quarterly results. 

AeroVironment, Inc jumped 5.4% to $95.20 after the military drone maker reported better-than-expected quarterly results and forecasted higher-than-expected full-year revenue.