With the Expectations of the Fed On Hold, Market Indexes Rebound In Cautious Trading

Alexander Garcia
10 Jun, 2024
Miami

Market indexes managed to climb higher after the morning doldrums as investors awaited the Fed's monetary policy decisions and May's inflation update. 

Stocks struggled to find their footing in early trading on Monday following the benchmark index advance or more than 1% in the previous week. 

The S&P 500 index and the Nasdaq Composite advanced 1.3% and 2.4%, respectively, in the previous week after the nonfarm payrolls surpassed the highest expectations. 

Investors are hoping to get more insights into the policymakers' thinking as the Federal Reserve is set to announce its rate decisions and economic growth projections on Wednesday. 

The Fed is expected to keep its interest rate range unrevised between 5.25% and 5.50%, and policymakers may provide clues about the timing and number of likely rate cuts later in the year. 

Market participants have dialed down their rate-cut expectations from as high as four to only one after the Fed's meeting in September. 

Investors are also looking forward to May's inflation data on Wednesday, which could provide additional insights on the strength of inflationary pressures and the future rate path. 

The consumer price index is expected to hold steady at 3.4%, and core inflation is likely to edge slightly lower to 3.5%.

Last week, the S&P 500 index traded at a new intraday record high amid continued strength in semiconductor stocks powering artificial intelligence development. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.1% to 5,353.07, and the Nasdaq Composite rose 0.3% to 17,180.76.

The yield on 2-year Treasury notes edged higher to 4.89%, 10-year Treasury notes decreased to 4.46%, and 30-year Treasury bonds edged higher to 4.59%.

WTI crude oil increased $1.70 to $77.30 a barrel, and natural gas prices rose 13 cents to $3.05 a thermal unit.

Gold increased by $15.46 to $2,308.67 an ounce, and silver rose 52 cents to $29.66. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 105.24.

 

U.S. Stock Movers

Nvidia edged down 0.2% to $120.10 after the advanced chipmaker traded for the first time, reflecting a 10-for-1 stock split. 

Nvidia's market cap crossed the $3 trillion mark for the first time in Friday's trading after investors bid up the stock by 10% in the previous week. 

GameStop declined 4.5% to $27.07, and the video game retailer extended losses following the roller-coaster trading in the previous week. 

Meme stock plunged in Friday's trading after the company announced another stock offering and said sales plunged in its latest quarter. 

Trader and meme stock influencer Keith Gill, also known by his screen name "Roaring Kitty," announced in his first ever live stream on X and YouTube in a few years that he did not have institutional investors. 

Previously, Gill shared a screenshot of his holding on GameStop that showed a market worth of $116 million. 

KKR, GoDaddy, and CrowdStrike advanced after the S&P Dow Jones Indices plans to include these three stocks in the S&P 500 index, replacing Robert Half, Comerica, and Illumina. 

KKR jumped 8.8% to $106.56, GoDaddy advanced 2.2% to $142.40, and CrowdStrike Holdings gained 7.7% to $376.60. 

Robert Half declined 0.4%, Illumina fell 5.5%, and Comerica dropped 2.4%. 

 

Far-right Parties Make Significant Gains In EU Elections 

European markets faced heavy selling pressure in Monday's trading, and the euro fell to a one-month low after far-right parties gained ground in European Union elections. 

Benchmark indexes in Frankfurt, Paris, and London declined sharply amid fresh political uncertainty in the region, as far-right parties made sizable gains in Germany, France, Austria, and Italy. 

French President Emmanuel Macron's Renaissance party suffered heavy defeat from the far-right National Rally party, and German Chancellor Olaf Scholz's center-left Social Democrats dropped to third place behind the extreme right-wing party Alternative for Germany. 

Amid a wave of anti-establishment on the continent, leading mainstream parties held on to the majority of the 720-member European Parliament on Sunday but suffered heavy defeats from the rise of far-right parties. 

The National Rally Party is expected to win 33% of the incoming European Union parliament, more than double the 15% vote by Macron's Renaissance party, forcing the French president Macron to dissolve parliament. 

French President Macron acknowledged the defeat and showed his commitment to democratic ideals by calling the snap election a risky move that could make his remaining three years of presidency ineffective. 

“I’ve heard your message and your concerns, and I won’t leave them unanswered," and Macron added, "France needs a clear majority to act in serenity and harmony." 

Provisional results of the European Parliament, the legislative branch of the 27-member trade bloc, showed Social Democrats losing 4 seats to 135, Christian Democrats gaining 13 seats to 189, and the pro-business Renew group down 19 to 83. 

Georgia Meloni's Brothers Party in Italy won 28% of the vote, surpassing the 26% it won in the national election in 2022. 

On the economic front, investors are looking forward to several key indicators this week. 

In Germany, wholesale prices are expected to advance for the third month in a row, and industrial production is expected to rise in the eurozone and Italy but decline in the U.K. after rising in the previous two months in a row.

Investors are also looking forward to the release of international trade balances in the Euro Area.

 

Europe Indexes and Yields

The DAX index decreased by 0.8% to 18,406.18; the CAC-40 index fell by 2.0% to 7,841.65; and the FTSE 100 index declined by 0.4% to 8,216.71. 

The yield on 10-year German bonds edged higher to 2.65%. French bonds inched higher to 3.20%; the UK gilts edged higher to 4.31%; and Italian bonds inched lower to 4.03%.

The euro edged higher to $1.073; the British pound inched higher to $1.269; and the U.S. dollar weakened to 89.67 Swiss cents.

Brent crude decreased $0.06 to $79.61 a barrel, and the Dutch TTF natural gas fell by €0.71 to €32.50 per MWh.

 

Europe Stock Movers

French banks declined following the broad market fall following the surprise legislative snap election announcement by French President Emmanuel Macron. 

Credit Agricole declined 4.4% to €14.0, BNP Paribas dropped 4.8% to €63.21, and Societe Generale fell 7.3% to €24.12. 

Airbus SE decreased 1.1% to €148.34 after the defense company and plane maker's satellite unit received an order to launch satellites from an entity controlled by the U.A.E. 

Pennon Group plc declined 1.2% to 589.50 pence after the British water company announced the appointment of David Sproul as chairman, replacing Gill Rider, after the company's annual general meeting on July 24. 

Tristel plc rose 2% to 438.50 pence, and the maker of infection prevention products appointed Matthew Sassone as chief executive officer effective September 2. 

 

Japan's GDP Decline Was Less than Previously Expected 

Benchmark indexes in Tokyo advanced in Monday's trading, and investors reviewed two key economic reports. 

The Nikkei 225 and the Topix gained as much as 1% after the GDP growth decline was less than previously expected and the current account surplus rose more than expected. 

Japan's economy shrank 1.8% in the first quarter, less than the previously estimated decline of 2.0% by the government. 

The revision was largely because of a smaller decline in private investment of 0.4%, less than 0.5% in the previous quarter. 

On a quarterly basis, Japan's GDP decline of 0.5% was unrevised, according to the data released by the Cabinet Office. 

Japan's GDP contracted as consumption and exports declined from the previous quarter, and the weaker yen contributed to a higher import bill for energy and other raw materials. 

 

Current Account Surplus Rebounded

Japan's current account surplus rose more than expected to 2.05 trillion yen, an increase of 8.2% from a year ago, according to the Ministry of Finance. 

However, the current account surplus decreased from 3.399 trillion yen in March. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average increased 0.9% to 39,038.16, and the Topix index advanced 1% to 2,782.49. 

Tech stocks led the gainers in Tokyo following the late rebound in Friday's trading in New York. 

Tokyo Electron, Socionext, Advantest, Screen Holdings, and SoftBank gained between 0.3% and 4%. 

Banks were among the leading gainers in Monday's trading. 

Mitsubishi UFJ, Sumitomo Mitsubishi, and Mizuho Financial Group added between 0.5% and 0.7%. 

Hitachi, Sumitomo Pharma, Sumitomo Electric, and Dai-Ichi Life gained more than 3%. 

Kao Corp., the maker of chemicals and cosmetics, declined 4.5% to ¥6,740.0.