S&P 500 Index Holds Steady Ahead of Key Inflation Update, Global Markets Turn Lower

Alexander Garcia
27 Jun, 2024
Miami

Benchmark indexes gyrated around the flatline, and semiconductor stocks took a breather amid valuation worries. 

Investors also reviewed the latest batch of mixed-quarterly results and economic updates. 

The S&P 500 index and the Nasdaq Composite flatlined after Micron Technology reported better-than-expected quarterly results, but the current quarter outlook fell short of the market's expectations. 

Levi Strauss reported weaker-than-expected quarterly results, despite the strong worldwide demand for denim apparel. 

 

U.S. Initial Jobless Claims Eased Last Week 

On the economic front, initial weekly jobless claims at the end of the previous week fell by 6,000 to 239,000. The weekly claims declined for the second consecutive week after reaching a 10-month high of 243,000. 

Meanwhile, continuing claims rose to 1,84 million, the highest level since the end of 2001. 

 

First Quarter GDP Growth Revised Slightly Higher  

U.S. GDP growth was revised higher to 1.4% in the first quarter, faster than the 1.3% annual pace estimated in the second estimate, the U.S. Bureau of Economic Analysis reported Thursday. 

The economic growth in the first quarter was the slowest since the economic contraction in the first half of 2022. 

The personal consumption expenditure price index, an alternative measure of inflation preferred by policymakers, increased 3.4% for all items and rose 3.7% for core items. 

Both measures were revised higher by 0.1 percentage points from the second estimate. 

 

U.S. Durable Goods Orders for the Fourth Consecutive Month In May

New orders for durable goods unexpectedly rose 0.1% in May, but slower than the downwardly revised 0.2% increase in April, the U.S. Census Bureau reported Thursday. 

Durable goods orders rose for the fourth month in a row, but at the slowest pace, due to solid demand for computer products and transportation equipment. 

Non-defense new orders declined 0.2%, and non-defense orders, which exclude volatile aircraft orders, known as capital goods orders, declined 0.6% in May after rising 0.3% in the previous month. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.01% to 5,481.98, and the Nasdaq Composite rose 0.2% to 17,846.13. 

The yield on 2-year Treasury notes edged lower to 4.76%, 10-year Treasury notes increased to 4.31%, and 30-year Treasury bonds edged higher to 4.45%.

WTI crude oil increased $0.49 to $81.39 a barrel, and natural gas prices fell 2 cents to $2.79 a thermal unit.

Gold decreased by $24.04 to $2,322.58 an ounce, and silver rose 46 cents to $29.17. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 105.75.

 

U.S. Stock Movers

Micron Technology declined 4.6% to $135.74, and the semiconductor company reported better-than-expected quarterly results. 

The company also issued a revenue outlook for the current quarter of $7.6 billion, which met some investors' expectations. 

Levi Strauss dropped 19% to $19.49 after the jeans maker reported weaker-than-expected quarterly results despite the current strong demand for denim products. 

AeroVironment declined 6.5% to $180.75, despite the maker of unmanned vehicles posting better-than-expected quarterly results. 

Revenue in the fiscal fourth quarter increased to $197 million, and adjusted earnings per share were 43 cents. 

 

European Market Indexes Swing Around Flatline

Market indexes across Europe were little changed as investors looked ahead to the first round of elections this weekend in France. 

Benchmark indexes in Paris, London, and Frankfurt lacked direction, and bond yields edged higher amid election uncertainties in France and the UK. 

Investors are bracing for shifting economic priorities that could further delay France meeting its budget deficit target if far-right parties win a larger share of parliamentary seats. 

In the UK, the Conservative Party is also likely to lose its grip on power as voters prefer to hand over the reign of power to the Labour Party, which could further increase the nation's pile of debt. 

The Riksbank held its key lending rate at 3.75%, said inflation is nearing the 2% target rate, and added that if inflation expectations do not change, rates may be cut two to three times in the second half of the year. 

On the economic front, Spain's retail sales growth slowed to 0.2% in May from 0.3% in April, the National Statistics Institute reported Thursday. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 18,205.39; the CAC-40 index fell by 1.0% to 7,530.72; and the FTSE 100 index fell by 0.6% to 8,179.68. 

The yield on 10-year German bonds edged higher to 2.46%; French bonds inched higher to 3.19%; the UK gilts edged higher to 4.16%; and Italian bonds increased to 4.03%.

The euro edged lower to $1.07; the British pound inched lower to $1.265; and the U.S. dollar advanced to 89.70 Swiss cents.

Brent crude increased $0.40 to $85.65 a barrel, and the Dutch TTF natural gas rose by €0.23 to €34.23 per MWh.

 

Europe Stock Movers

H & M Hennes & Mauritz AB dropped 12.5% to SEK70.15 after the Swedish retailer reported a smaller-than-expected increase in second quarter net income. 

Nordex SE declined 1.4% to €11.84, and the German wind turbine maker said it plans to restart its production in Iowa, United States. 

China-linked stocks turned lower after Chinese industrial profit growth in May slowed to 0.7%, a sharp slowdown from the annual pace of 4% in the previous month. 

Mining companies in the UK and French luxury stocks turned lower after the release of the Chinese data. 

Anglo American, Antofagasta, and Glencore declined by around 1%. 

Hermes International fell 1% to €2,188; LVMH declined 1.1% to €719.20; and Kering SA rose 3.8% to €338.75. 

Watches of Switzerland Group PLC rose 9.3% to 436.80 pence after the UK-based retailer estimated stable market conditions after the sharp decline in business following the COVID-19 pandemic slump. 

 

The Yen's Weakness Raises Intervention Risk, Japan's Retail Sales Growth Accelerated In May 

Stocks in Tokyo struggled as investors remained focused on the persistent weakness in the yen. 

The Nikkei 225 index fell 1%, and the broader Topix index dropped more than 0.4% as investors struggled to understand the long-term impact of the weaker yen. 

The Bank of Japan is showing little urgency in supporting the faltering yen after the currency dropped to the lowest level since 1986. 

Finance Minister Shunichi Suzuki issued a strongly worded warning against the sharp moves in the currency after the yen dropped to 160.87 against the U.S. dollar. 

The yen has fallen 2% in June and declined 14% since the start of 2024 as the Bank of Japan struggles to retain its bond buying program and hold interest rates at 0.10%. 

Japan's retail sales accelerated in May to a 3% annual pace from the revised 2.4% in April, the Ministry of Economy, Trade, and Industry reported Thursday. 

On a monthly basis, seasonally adjusted retail sales rose 1.7% after rising 0.8% in the previous month. 

 

Japan Stock Movers 

The Nikkei 225 stock average declined 1% to 39,284.10, and the Topix index dropped 0.4% to 2,792.77. 

Tech stocks were under pressure following the sharp moves in the yen. 

Tokyo Electron, Advantest, and Screen Holdings declined between 0.5% and 3%. 

Daiichi Sankyo, Japan Exchange Group, Sharp, and Daikin Industries declined 3%. 

Banks were also under pressure but rebounded to close higher. 

Mizuho Financial jumped 0.5%, Sumitomo Mitsui edged up 0.1%, and Mitsubishi UFJ added 0.8%. 

 

 

Hang Seng Index Drops 2%, Sharp Decline In China Industrial profit Growth 

Investors turned cautious and sold stocks in Hong Kong and Shanghai after the latest Chinese economic data underwhelmed. 

The Hang Seng dropped 2% and the CSI 300 index declined 0.3% after the sharp slowdown in industrial profit added to the ongoing property market woes. 

China's profit growth among industrial companies slowed to 0.7%, decelerating from a 4% increase in the previous month, the National Statistics Bureau reported Thursday. 

The data confirmed the uneven and fragile economic recovery as policymakers struggle to revive consumer confidence and economic growth. 

The Beijing area government relaxed rules to support the property market, which drew tame reactions from investors. 

The local government lowered down payment and mortgage rates for first-time home buyers, hoping that relaxed measures would support a higher level of activity. However, measures did not go far enough and were deemed late following the similar announcements from other Tier 1 cities. 

Market sentiment was also on the backfoot after the Japanese yen dropped to a fresh new low, crossing the 160 mark against the U.S. dollar. 

The steady devaluation of the yen put additional pressure on the Chinese yuan and supported capital outflows. 

Property sector stocks were under renewed pressure as several companies neared the lower market cap requirement limit to participate in the Stock Connect program. 

The cross-border investment program requires a minimum market cap of HK$4 billion, or $512 million, to attract capital from mainland investors. 

The latest stock price weakness is likely to add to the woes of the property companies as they struggle with liquidity stress and financial restructuring demand from creditors. 

 

China Stock Movers 

The CSI 300 index decreased 0.3% to 3,465.98, and the Hang Seng Index dropped 2% to 17,721.01. 

Property developers were in focus as eight companies are teetering near the threshold requirement to be included in the Stock Connect program. 

Shimao Group Holdings declined a fraction to HK $0.76, and Soho China decreased 0.2% to HK $0.68. 

Country Garden Holdings, one of the leading residential property developers, is scheduled for a liquidation hearing next month in Hong Kong. 

New World Development declined 0.4% to HK $7.20, and the Hong Kong-based property developer sold a stake in a project to its parent company for 1.44 billion yuan to meet its debt obligations.