Stock Rally Hits Snag Amid Mixed Economic Data: Market Recap

A recent surge in stock prices stumbled as Wall Street analyzed mixed economic data to predict the Federal Reserve's potential moves. The S&P 500 approached 5,500, raising concerns about a possibly overvalued market. Drops in major tech stocks impacted trading, while Treasury yields increased slightly. Market expectations currently predict fewer than two Fed rate cuts this year.

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In May, US industrial production increased, driven by a broad rise in factory output. However, retail sales showed minimal growth and previous months' figures were revised downward, indicating consumer financial difficulties.

"The economy may achieve a soft landing if the Fed quickly adjusts its policies in response to changing conditions," said Jeffrey Roach of LPL Financial.

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John Williams, President of the Federal Reserve Bank of New York, mentioned on Fox Business that the US economy is "moving in the right direction" but did not specify when he would support a rate reduction. Williams is among several officials scheduled to speak on Tuesday.

The S&P 500 remained around 5,480, while 10-year Treasury yields dropped three basis points to 4.25%. Traders also prepared for a $13 billion sale of 20-year bonds, with about 10 companies planning new bond sales in the high-grade market ahead of the US holiday on Wednesday.

A survey by Bank of America Corp. suggested that global investors are likely to continue investing in record-high stock markets. When asked which asset class would benefit most from reallocating money-market funds, 32% chose US stocks, 19% opted for global equities, and 25% indicated they would buy government bonds.

Despite enthusiasm over the US stock rally driven by a few big tech stocks, some investors are looking for ways to diversify their risks. The top seven tech companies have contributed over 60% of the S&P 500’s gains this year.

The market is considered overbought, but the rise in stock prices is limited, with only 46% of stocks trading above their 50-day moving averages. The relative strength index (RSI) spread between market cap and equal-weighted S&P 500 is the widest since at least 1990.

Corporate News:

• Nvidia Corp. insiders have sold over $700 million worth of shares this year amid strong demand for its chips.

• Fisker Inc. filed for bankruptcy after stopping production of its troubled Ocean SUV.

• A Boeing Co. inspector claimed the company mishandled and lost track of hundreds of faulty parts, some of which might have been installed on new 737 Max planes.

• Lennar Corp. reported higher-than-expected orders but missed its forecast for the current quarter.

• Philip Morris International Inc. stopped online sales of its nicotine pouch brand Zyn in the US following a subpoena related to banned flavored products in Washington, D.C.

• NextEra Energy Inc. plans to raise $2 billion by selling equity to fund new energy projects and reduce short-term debt.

• Best Buy Co. is preparing for a major launch of artificial intelligence computers.

Key Events This Week:

• UK CPI, Wednesday

• US Juneteenth holiday, Wednesday

• China loan prime rates, Thursday

• Eurozone consumer confidence, Thursday

• UK Bank of England rate decision, Thursday

• US housing starts and initial jobless claims, Thursday

• Eurozone S&P Global Manufacturing PMI and S&P Global Services PMI, Friday

• US existing home sales and Conference Board leading index, Friday

• Federal Reserve’s Thomas Barkin speaks, Friday

Market Movements:

• The S&P 500 remained steady at 10:57 a.m. in New York.

• The Nasdaq 100 dropped 0.2%.

• The Dow Jones Industrial Average declined 0.1%.

• The Stoxx Europe 600 increased 0.6%.

• The MSCI World Index rose 0.2%.

Currencies:

• The Bloomberg Dollar Spot Index decreased 0.1%.

• The euro remained steady at $1.0739.

• The British pound fell 0.1% to $1.2692.

• The Japanese yen decreased 0.1% to 157.95 per dollar.

Cryptocurrencies:

• Bitcoin fell 2.5% to $64,696.38.

• Ether dropped 3% to $3,408.42.

Bonds:

• The yield on 10-year Treasuries fell three basis points to 4.25%.

• Germany’s 10-year yield remained steady at 2.41%.

• Britain’s 10-year yield decreased five basis points to 4.07%.

Commodities:

• West Texas Intermediate crude increased 1.2% to $81.30 a barrel.

• Spot gold rose 0.2% to $2,323.69 an ounce.

Also Read: Global Stocks Under Pressure from French Election Risks and Rate-Cut Delays