Optimism Rules U.S. and Global Stock Markets

Alexander Garcia
18 Jun, 2024
Miami

Stocks struggled to get their footing ahead of a public holiday on Wednesday, and investors reviewed the weaker-than-expected update on retail sales. 

The S&P 500 index and the Nasdaq Composite lacked direction in thin trading as investors assessed the health of the consumer. 

Both widely followed indexes closed at new record highs on Monday; they inched higher in Tuesday's trading after struggling at the open but failed to make a significant advance in Tuesday's trading. 

Semiconductor stocks led the tech sector to advance and extend gains from the previous week and the previous session. 

Nvidia, Qualcomm, and Micron Technology jumped between 2% and 5%, but Broadcom declined 0.2% after surging more than 20% in the previous two sessions following the announcement of a 1-for-1 stock split.

 

Retail Sales Edged Slightly Higher In May

Retail sales in May rose by 0.1% from the previous month, following a downwardly revised fall of 0.2% in April, the U.S. Census Bureau reported Tuesday. 

The weak reading on retail sales offers another sign of cooling consumer spending amid elevated prices and a high cost of living. 

Sales at gasoline stations declined 2.2%, food services and drinking places fell 0.4%, and food and beverage stores fell 0.2%. 

Excluding gasoline, sales rose 0.3%.

Sales excluding food services, auto dealers, building materials stores, and gasoline stations, which are used in the calculation of gross domestic product, rose 0.4% following a drop of 0.5% in the previous month. 

On an annual basis, retail sales rose 2.3% in May, following a downwardly revised 2.7% increase in April. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,483.33, and the Nasdaq Composite fell 0.01% to 17,841.51. 

The yield on 2-year Treasury notes edged lower to 4.73%, 10-year Treasury notes decreased to 4.25%, and 30-year Treasury bonds edged higher to 4.40%.

WTI crude oil increased $0.35 to $80.55 a barrel, and natural gas prices fell 4 cents to $2.83 a thermal unit.

Gold decreased by $1.84 to $2,318.83 an ounce, and silver fell 11 cents to $29.27. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 105.26.

 

U.S. Stock Movers

Lennar decreased 3.3% to $151.40 despite the home builder reporting better-than-expected results in the second fiscal quarter. 

Chegg soared 17% to $3.05 after the online textbook and education services provider announced a restructuring, including job cuts. 

The company plans to reduce its global headcount by 23% and reiterates its commitment to an operating earnings margin of 25%. 

La-Z-Boy jumped 18.8% to $40.47 after the furniture maker reported better-than-expected fourth-quarter results. 

 

European Markets Rebounded In Choppy Trading, Inflation Edged Higher 

European markets rebounded for the second day in a row, and the yield on French bonds stabilized, but the spread with the German bond remained elevated. 

French President Emmanuel Macron's decision to dissolve the lower house of parliament sent shock waves through political circles, not just in France but across the European Union. 

The rise of far-right parties is set to alter political agendas, domestic economic priorities, and pension reforms, which could negatively impact bond ratings and interest rate paths. 

Last week, investors were on edge after the European Union election, which clearly showed voter anger and frustration over the rising cost of living and persistently elevated prices over the last three years. 

The spread between the French and German bonds soared above 70 basis points and stayed at that level for the second week in a row, amid French election uncertainty and the possible rise of the far-right parties into the government. 

The annual pace of inflation in the eurozone accelerated to 2.6% in May from 2.4% in April, Eurostat confirmed in its final update on Tuesday. 

Inflation also edged higher to 2.7% in the wider European Union region, higher than 2.6% in the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 18,131.97; the CAC-40 index rose by 0.8% to 7,628.80; and the FTSE 100 index advanced by 0.6% to 8,191.29. 

The yield on 10-year German bonds edged higher to 2.42%. French bonds inched higher to 3.15%; the UK gilts edged higher to 4.10%; and Italian bonds decreased to 3.90%.

The euro edged lower to $1.071; the British pound inched higher to $1.268; and the U.S. dollar weakened to 88.79 Swiss cents.

Brent crude decreased $0.50 to $84.75 a barrel, and the Dutch TTF natural gas rose by €0.40 to €34.65 per MWh.

 

Europe Stock Movers

Ashtead Group declined 5% to 5,234.0 pence after the equipment rental company estimated slower revenue growth in the fiscal year 2025. 

Whitbread Group advanced 2.5% to 2,974.0 pence after the UK-based hotel group reiterated its annual outlook despite reporting weak first quarter results. 

Frasers Group increased 0.3% to 858.0 pence after the retail chain group launched a new stock buyback plan worth as much as £80 million. 

Carrefour SA declined 8.3% to €13.32 on a report that the French finance ministry is looking to impose a "record fine" on the hypermarket chain operator. 

Schneider Electric rose 1.1% to €225.65, and the French electric equipment and automation system maker was upgraded by Jeffries to "buy" from "hold."

Novonesis increased 6.8% to DKK 428.80 after the Danish biotech company lifted its full-year outlook, citing rising demand for its biosolutions. 

 

Tech Stocks Drive a Rebound In Japan Indexes, Yen Faces Persistent Downward Pressure 

Market indexes in Tokyo rebounded and erased most of the losses in the previous session following a rebound in tech stocks in overnight trading in New York. 

The Nikkei 225 and the Topix indexes jumped more than 0.4% in Tuesday's trading after tech stocks led the gainers in Tokyo. 

Mega-cap tech stocks in New York traded higher, lifting the S&P 500 index and the Nasdaq Composite to new highs despite Treasury yields rebounding in Monday's trading. 

The yen edged stabilized at 157.56 against the U.S. dollar after weakening in Friday's trading after the Bank of Japan held its interest rate steady and showed little urgency in tapering government bond purchases. 

Governor of the Bank of Japan, Kauzo Ueda, told lawmakers today that the central bank is prepared to raise rates after the next policy meeting in July if future economic data support the move. 

Ueda also stressed that a weak yen could increase operating costs for businesses and dampen consumer purchases, but higher wages could also support consumer sentiment and revive retail sales. 

The yen has been under pressure and trading near a three-decade low after the Bank of Japan has shown little interest in raising rates or lowering government bond purchases, and the wide and persistent yield gap between the U.S. and Japan has also negatively impacted the currency. 

The yen is expected to depreciate further over the next six months, as the finance ministry and the Bank of Japan prefer a steady and slow depreciation of the currency and avoid expensive market interventions.

 

Japan Stock Movers 

The Nikkei 225 stock average rose 0.7% to 38,388.05, and the Topix index advanced 0.4% to 2,710.20. 

Takeda Pharmaceuticals declined 3% to ¥4,043.0 after a seizure drug failed in late-stage trials. 

Rakuten Group jumped 4.5% to ¥824.0 after the company reached a settlement with IBM for a patent dispute. 

TDK Corp. soared 6.9% to ¥9,428.0 after the electronic component and data-storage media maker said that the latest improvement in battery technology will enhance battery life for wearable devices. 

Nintendo, Murata, Nexon, Mitsubishi Heavy Industries, Konami Group, and Murata advanced more than 3%. 

Mercari Inc. declined 2.5% to ¥2,034.50, and Sony and Mitsubishi Electric declined around 0.3%. 

 

China Stocks Drift Lower Amid Lackluster Trading and Rising Trade Frictions with the EU 

Market sentiment was weak in Shanghai and Hong Kong trading amid rising trade tensions between China and the European Union. 

The CSI 300 index and the Hang Seng index lacked direction in early afternoon trading after China retaliated with an anti-dumping investigation on pork imports from Europe. 

The move comes after the European Union placed an additional tariff of up to 38% on electric vehicle imports from China following a seven-month investigation. 

Investors were on the defensive a day after China's statistics bureau reported a flood of mixed economic data, indicating a revival in consumer spending overshadowed by the deepening malaise in the property sector. 

Moreover, the People's Bank of China held its one-year medium-term lending rate at 2.5%, dashing hopes of some investors looking for a rate cut to revive property transactions. 

China's property sector is battling on two fronts: buyers are holding back amid falling prices, and property developers are struggling amid heavy debt loads and overbuilding. 

China's property prices are falling at a rapid pace in the second- and third-tier cities, but prices are still elevated in the top-tier cities like Beijing and Shanghai, raising affordability issues for first-time home buyers. 

 

China Stock Movers 

The CSI 300 index increased 0.3% to 3,545.64, and the Hang Seng index fell 0.2% to 17,903.06. 

BYD decreased 0.1% to HK$233.20, and Warren Buffett-controlled Berkshire Hathaway lowered its stake in the electric vehicle maker to 6.9% from 7.0%. ahead of the European Union tariffs. 

Li Auto declined 3.7% to HK$71.15, and Geely Automobile fell 0.1% to HK$8.86. 

Zijin Mining Group declined 2.5% to HK$15.90 after the company announced its plan to sell convertible bond debt and stocks to raise $2.5 billion. 

Wuhan Youji Holdings soared more than 78% to HK$9.85 after the maker of toluene derivative products used in oil refining and paints priced its initial public offering at HK$5.50 per share.