U.S. Indexes Struggled to Advance and Treasury Yields Turned Lower

Alexander Garcia
03 Jun, 2024
Miami

Stocks on Wall Street turned lower after two hours of trading following the latest update on the manufacturing sector. 

Market indexes struggled after U.S. manufacturing showed signs of a slowdown, and the S&P 500 index and Nasdaq turned lower by more than 0.5%. 

The ISM manufacturing purchasing managers' index declined to 48.7 in May from 49.2 in April. 

The reading showed another month of contraction on soft demand, and new order growth eased and the backlog of orders fell. 

The S&P 500 and the Nasdaq Composite have advanced in six of the last seven months, following better-than-expected earnings for the second quarter in a row and the continued surge in semiconductor stocks linked to artificial intelligence. 

The Nasdaq Composite halted its five consecutive weekly gains. 

This week, investors are looking forward to the release of two critical labor market updates: nonfarm payrolls and the job opening reports.

The nonfarm payroll employment data, scheduled to be released on Friday, is expected to increase by 185,000 after expanding by 170,000 in April, according to a survey conducted by Ticker.com. 

The jobless rate is expected to remain steady at 3.9%, but wage gains are likely to increase at a faster pace of 0.3%.

The number of job openings in April, scheduled to be released on Tuesday, is expected to ease to 8.4 million, closer to the normal pattern of hiring. 

Private payrolls in May are likely to accelerate to 190,000, following the gains in April, according to the survey released by ADP. 

The ADP survey is generally unreliable, and monthly data show larger swings than the government's nonfarm payroll data. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.3% t6 5,247.80, and the Nasdaq Composite fell 0.2% to 16,696.56. 

The yield on 2-year Treasury notes edged lower to 4.83%, 10-year Treasury notes decreased to 4.41%, and 30-year Treasury bonds edged higher to 4.55%.

Over the weekend, the oil-producing nations of OPEC+ announced their plans to keep production cuts until the end of the year in an effort to prevent the price of oil from sliding further. 

WTI crude oil increased $2.79 to $74.20 a barrel, and natural gas prices rose 9 cents to $2.68 a thermal unit.

Gold increased by $21.33 to $2,348.60 an ounce, and silver rose 23 cents to $30.64. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.20.

 

U.S. Stock Movers

Stericylce soared 14.5% to $59.25 after the company agreed to be acquired by Waster Management for $7.2 billion. 

Waste management decreased 1.8% to $206.80. 

GameStop soared 74% to $40.35 on speculation that investor Keith Gill, who inspired a short squeeze in the stock in 2021, could have a large position in the stock. 

The social media accounts controlled by Keith Gill showed 5 million shares and 120,000 call options. 

MarineMax jumped 19.3% to $34.02, and the company is in talks to be acquired by OneWater Marine for $40 a share. 

The news was first reported by Bloomberg News and could not be independently verified. 

Spotify Technology jumped 4.9% to $311.12 after the music streaming service provider announced a price increase for its premium subscriptions in the U.S. starting in July. 

Paramount Global jumped 6.4% to $22.0 after the media company agreed on merger terms with Skydance. 

The companies are expected to announce the details of the deal terms as early as this week, according to reports by CNBC and The Wall Street Journal. 

Nvidia Corp. jumped 4.2% to $1,142.19 after the advanced chipmaker announced three new products. 

 

Rate Cut Hopes Lift European Markets 1%

Market indexes in Europe soared as much as 1% in Monday's trading on the expectation that the European Central Bank is ready to cut its rate for the first time since 2016. 

Benchmark indexes in Frankfurt, Paris, and London closed down in the previous week amid rate jitters and high-valuation worries. as investors reassessed the economic outlook amid high energy prices and weak consumer sentiment. 

The European Central Bank is expected to cut its policy rate by 25 basis points, and investors are looking for clues about the possible additional rate cuts. 

In Monday's trading, market sentiment was bolstered after the eurozone's manufacturing activity outlook was revised slightly lower. 

 

Eurozone Manufacturing Downturn Eases

On the economic front this week, investors are looking forward to the release of a final update on the first quarter GDP growth, retail sales, producer price inflation, and employment estimates in the eurozone. 

Germany and France are also set to release international trade updates.

The eurozone manufacturing purchasing managers' index was revised to a 14-month high to 47.3 in May from 45.6 in April, S&P Global and Hamburg Commercial Bank (HCOB) said in a joint report. 

Two weeks ago, in the preliminary estimate, the index was valued at 47.4. 

France's manufacturing index was revised one point higher to 46.4, but the index remains deep in contraction territory. 

The index value below 50 indicates contraction in growth, and the index value above 50 shows growth. 

“This could be the turning point for the manufacturing sector. 

The industry is on the verge of halting the production decline that has persisted since April 2023," said Cyrus de la Rubia, HCOB's chief economist.

France and Germany saw manufacturing contractions ease, but Spain and the Netherlands experienced an acceleration in growth in May. 

 

Europe Indexes and Yields

The DAX index increased by 0.6% to 18,608.16; the CAC-40 index rose by 0.06% to 7,998,02; and the FTSE 100 index advanced by 0.2% to 8,262.75. 

At the end of last week, the DAX index declined 1.3% and advanced 3.2% in May. and the CAC 40 index fell 1.6% in the week and declined 0.1% in May. 

The FTSE 100 index declined 0.6% in the week and rose 1.6% in May. 

The yield on 10-year German bonds edged lower to 2.62%; French bonds inched lower to 3.10%; the UK gilts edged lower to 4.29%; and Italian bonds inched higher to 3.91%.

The euro edged higher to $1.082; the British pound inched higher to $1.272; and the U.S. dollar gained to 90.14 Swiss cents. 

Brent crude decreased $2.50 to $78.51 a barrel, and the Dutch TTF natural gas rose by €1.50 to €36.50 per MWh.

 

Europe Stock Movers

L. M. Ericsson increased 2.7% to SEK 66.12 after the company said its four-year compliance period for the U.S. anti-corruption agreement ended on June 2. 

Cerillion PLC jumped 3.2% to 1,588.0 pence after the customer billion system provider for the telecom industry signed an agreement with Virgin Media Ireland. 

Sirius Real Estate jumped 1.6% to 98.90 pence after the commercial and industrial real estate developer reported higher fund flows in the year ended in March. 

GSK plc dropped 9.6% to 1,600.81 pence after a state court in Delaware found enough reasons to link its Zantac heartburn drug to cancer, permitting as many as 70,000 lawsuits to go forward. 

China-linked luxury stocks advanced following the news that China's manufacturing activities expanded for the seventh month in a row in May. 

LVMH, L'Oreal, Kering, and Richemont jumped between 0.2% and 0.6%. 

 

Japan's Corporate Capital Spending Rises 12th Consecutive Quarter

In a broad rally, market indexes advanced in Monday's trading in Tokyo. 

The Nikkei 225 and the Topix indexes advanced following the market gains in Friday's trading in New York and Europe. 

Market sentiment was positive for the second session in a row after the PCE price index, an alternative measure of inflation, held steady at 2.7%. 

The PCE price index increased at an annual pace of 2.7% in April, matching the four-month high rate in March. 

The core PCE price index, which excludes food and energy prices, held steady at 2.9%, matching the rate in the previous two consecutive months. 

Closer to home, Japanese companies increased capital expenditure on plant and equipment by 6.8% from a year ago in the first quarter, an increase for the twelfth quarter in a row, but slowed from the 16.4% jump in the fourth quarter of 2023.

 

Japan Stock Movers 

The Nikkei 225 Stock Average rose 1.2% to 38,965.50, and the Topix index advanced 1% to 2,798.93. 

Financial stocks led the gainers in Tokyo trading, and Mitsubishi UFJ, Mizuho Financial Group, and Sumitomo Mitsui gained between 1.5% and 1.9%. 

Tech stocks also gained following the late rally in tech stocks in overnight trading in New York. 

Tokyo Electron, Advantest, Screen Holdings, and Softbank jumped between 0.5% and 1.3%. 

Chemical and pharmaceutical companies were also in favor of Monday's trading. 

Nissan Chemical jumped 6% to ¥4,620.0, and Sumitomo Pharma jumped 7.5% to ¥328.0. 

Mercari, the community marketplace operator, jumped 11.7% to ¥2,048.0.

 

China's Factory Activities Accelerates to a 2-year High

Stocks in Shanghai and Hong Kong advanced in Monday's trading after a private survey showed a sustained expansion in general manufacturing activities. 

Benchmark indexes in Shanghai and Hong Kong jumped after the general manufacturing activities index showed expansion for the seventh month in a row and accelerated growth for the fourth consecutive month in May. 

The Caixin China General Manufacturing Purchasing Managers' Index rose to 51.7 in May from 51.4 in April, S&P Global reported Monday. 

The rate of growth was the fastest in 23 months, with firms in the consumer segment reporting sharp growth in output, driven by demand from domestic and foreign customers for new products. 

"Backlogged work meanwhile accumulated for a third month in a row and at the quickest pace since September 2021 amid rising new work inflows," the S&P report highlighted. 

Last week, the official manufacturing survey, which is based on smaller number of companies and relies on large and government controlled companies, unexpectedly contracted to 49.5 in May from 50.4 in April. 

 

China Stock Movers 

The CSI 300 index increased 0.3% to 3,588.99, and the Hang Seng Index jumped 2.5% to 18,530.77. 

In broad recovery, electric vehicle makers, banks, property developers, and general manufacturing companies advanced in Monday's trading. 

Li Auto jumped 5.3% to HK$82.30, BYD gained HK$234.0, and Geely Automobile Holdings advanced 4.6% to $9.92. 

Alibaba Group increased 2.6% to HK$76.85, JD.com traded higher by 2.3% to HK$116.60, and Tencent Holdings jumped 4.4% to HK$376.0. 

HSBC Holdings gained 1.4% to HK$69.50, Bank of China increased 1.6% to HK$3.76, and China Minsheng Banking rose 1% to HK$2.99.