Rosalind Evans
Wall Street saw a subdued performance as the strong momentum from the year’s opening solid rally started to cool off.
The S&P 500 remained almost unchanged in the midday trading session, keeping close to its highest level since April 2022. The Dow Jones Industrial Average saw a minor increase of 9 points, or less than 0.1%, settling at 34,416, while the Nasdaq composite remained more or less stagnant.
Tesla made a robust showing in the market, seeing a rise of 7.4%. The company reported over the weekend that its spring vehicle deliveries witnessed a significant 83% jump compared to the previous year. This was higher than analysts had forecasted, although price cuts may have affected these gains. The impact of these discounts on profits will become apparent when Tesla discloses its earnings on July 19.
Rivian, another player in the electric vehicle industry, saw a surge of 14.3% after it reported spring deliveries surpassing analysts’ predictions.
However, Apple underperformed, declining 1% despite achieving the milestone of being the first U.S. stock to end a trading day with a total value exceeding $3 trillion.
Most of the market saw muted activity following a rally that saw the S&P 500 rise six out of the past seven weeks, propelling the index nearly 16% higher for the year’s first half.
Trading on the U.S. stock market will close at 1 p.m. Eastern time and remain shut on Tuesday to celebrate Independence Day.
Despite many forecasts of an economic slowdown, the U.S. economy has proven resilient this year, particularly the job market, which remains strong despite significant interest rate hikes to combat inflation.
However, the manufacturing sector has been experiencing a slump, contracting for the eighth consecutive month in June, as the Institute for Supply Management reported. The contraction was worse than economists’ projections.
Brian Jacobsen, Chief Economist at Annex Wealth Management, remarked, “Manufacturing is stuck in the mud, and it seems like more rain is on the way.” He found solace only in the absence of inflationary pressures but pointed out that this provided little comfort with earnings remaining at risk.
Despite this, traders remain optimistic that the strength in other sectors of the economy will prevent a recession, supporting corporate profits. A forthcoming report this week will provide further clarity on this matter.
This Friday, the U.S. government will release its latest monthly report on job additions across the economy and wage growth. This data will be significant ahead of the Federal Reserve’s next meeting on interest rate policy.
After already increasing rates by a significant five percentage points from almost zero last year to control inflation, the Fed has hinted at a possible end to these hikes, which would reduce the pressure on the economy and financial markets. Wall Street is anticipating another rate hike on July 26.
Traders hope that this will be the last rate hike of the cycle. The Fed, however, has indicated that there might be two more rate hikes this year.
Apart from Friday’s jobs report, the latest updates on monthly inflation could influence the Fed’s decision at its next meeting.
In the bond market, yields fluctuated following disappointing data on manufacturing. The yield on the 10-year Treasury stabilized at 3.84% after an initial decline. This yield influences the rates for mortgages and other crucial loans.
The two-year yield, more influenced by Fed expectations, remained steady at 4.90% after trimming losses.
In overseas markets, European stocks were slightly down. In contrast, Japan’s Nikkei 225 rose 1.7%, continuing its strong start to the year. Japan’s quarterly “tankan report,” reflecting business sentiment compiled by the Bank of Japan, showed improvement for the fifth consecutive quarter since June of the previous year. Stocks across much of the rest of Asia were green, with a 2.1% increase in Hong Kong and a 1.5% rise in South Korea.
As we move further into the year, it will be interesting to watch how the US economy continues to perform, how global markets react, and what actions the Federal Reserve takes in response to various economic indicators. Only time will tell whether Wall Street’s slowing momentum is just a pause or a sign of things to come.
