Major Averages Face Headwinds On Lingering Rate Path Worries

Barry Adams
05 Jul, 2023
New York City

Market averages traded lower as trading resumed in holiday-shortened week and investors awaited minutes of Fed's policy meeting. 

Tech stocks traded lower after rallying for six weeks following optimism related to artificial intelligence fueled demand for semiconductor chips. 

Minutes from the Fed's policy meeting ending on June 14 are scheduled to be released later in the day by the Federal Reserve. 

Investors are looking for additional insights surrounding the decision to pause rate hike. Though the rate pause was widely invested, investors were surprised to learn that rates could rise as much as 50 basis points before the year's end. 

Investors also digested service sector surveys data from China, the Euro Area and the UK. 

Market indexes in Paris, Frankfurt and London edged down after the latest measures of the service sector showed a slower growth in the UK, the Euro Area and China but industrial activities in France and Spain were ahead of expectations. 

Eurozone Services PMI decreased to 52.0 in June from 55.1 in May, according to a final survey update released by S&P Global. In addition, the service sector expanded in the UK but at a slower pace.  

Any measure below 50 indicates contraction in growth and above shows expansion. 

The private survey of China's service industry conducted by Caixin/S&P Global indicated a decline to 53.9 in June from 57.1 in May. The growth in the sector declined to the slowest pace since January. 

Market indexes edged higher on Monday and built on solid gains in the first half and financial markets were closed on Tuesday. 

The S&P 500 index jumped 15.9% in the first half, its best return in the period since 2019 and the Nasdaq Composite index advanced 32.7%, its best performance in four decades. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.4% to 4,438.49 and the Nasdaq Composite edged lower 0.3% to 13,776.85.  

The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 3.86% and 30-year Treasury bonds edged up to 3.89%. 

Crude oil decreased $0.07 to $71.22 a barrel and natural gas prices decreased 2 cents to $2.72 a thermal unit. 

 

U.S. Stock Movers

Electric vehicle makers were in focus for the second day this week after Tesla and Rivian reported production data. 

Rivian Automotive Inc gained 4% to $20.29 and on Monday the company said vehicle deliveries in the June quarter surged 59% from a year ago to 12,640 units. 

Tesla Inc edged slightly higher to $280.11 and extended Monday's gains of 5% after the company reported vehicle production in the June quarter increased 83% to about 477,000. 

United Parcel Service, Inc declined 2.4% to $179.45 after talks with the labor union reached an impasse. 

The current labor agreement between UPS and Teamster expires at the end of July. 

On Wednesday, the Teamsters union said in a press release that UPS "walked away from table" but the company countered saying it had not walked away from negotiations and was hoping for the union to resume negotiations. 

American Equity Investment Life Holding increased 1.0% to $52.30 after the company agreed to be acquired by Brookfield Reinsurance for $4.3 billion.