Stocks started the week on a positive note, with traders waiting to hear from a raft of Federal Reserve speakers for clues on the outlook for interest rates.
The S&P 500 topped its average price of the past 50 days — a level seen by some as key in maintaining the positive momentum. In a thin week of economic data, investors will be watching the Fed’s Senior Loan Officer Opinion Survey (SLOOS). With higher funding costs recently hitting banks, expectations are that they have become more selective in terms of lending — which might have influenced Fed Chair Jerome Powell’s not-so-hawkish tone last week.
Investors are now cautiously upping their bets for policy easing this year, and yields on Fed-sensitive two-year notes are leading market gains. And yet, for all the signs of deceleration in some areas of the US economy, inflation remains sticky — a reality that may limit what the central bank can do and means bond yields are likely stuck in their recent ranges.
“Bulls will be looking to maintain their momentum after snatching last week from the jaws of bears,” said Chris Larkin at E*Trade from Morgan Stanley. “This week is light on high-profile economic data, but heavy on Fed members hitting the speaking circuit. Traders will be dissecting any comments they make about potential rate cuts.”
Equities extended gains into a third consecutive session. Treasury 10-year yields were little changed at 4.50%. Auctions this week of a combined $67 billion of 10- and 30-year securities will test demand for longer-dated debt. The government will also sell $58 billion of three-year notes.
“Mixed” messages from key US economic data and the accompanying swings in stock markets mean investors should load up on defensive sectors such as consumer staples, according to Morgan Stanley strategists.
A soft landing or a so-called no landing, where growth is resilient even as rates stay high, both remain possible for the US economy, the team led by Michael Wilson wrote in a note. This uncertain backdrop warrants an investment approach that can work as market pricing and leadership between groups of stocks gets whipsawed by the potential outcomes.
Corporate Highlights:
- At Berkshire Hathaway Inc.’s annual meeting in Omaha on Saturday, Warren Buffett heaped praise on Apple Inc. — after revealing he’d cut his stake in it.
- Micron Technology Inc. was upgraded to outperform from neutral by Baird after the recent pullback.
- Robinhood Markets Inc. has been formally warned by regulators that it may face an enforcement action tied to its cryptocurrency dealings.
- Tyson Foods Inc. raised its 2024 earnings outlook after posting second-quarter profits that beat analyst estimates amid a rebound in the US meat industry.
- United States Steel Corp. was raised to overweight at Morgan Stanley, based on prospects for “transformational” investments.
- Spirit Airlines Inc. gave revenue guidance for the second quarter that fell short of Wall Street’s expectations.
- Victoria’s Secret & Co. was downgraded to underweight at Morgan Stanley, which sees the risk of a profit miss and a full-year outlook cut when the company reports first-quarter results.
Key events this week:
- Australia rate decision, Tuesday
- Eurozone retail sales, Tuesday
- UBS earnings, Walt Disney, BP earnings, Tuesday
- Minneapolis Fed President Neel Kashkari speaks, Tuesday
- Toyota earnings, Wednesday
- Germany industrial production, Wednesday
- US wholesale inventories, Wednesday
- Fed Governor Lisa Cook speaks, Wednesday
- Bank of Japan issues summary of opinions from April policy meeting, Thursday
- China trade, Thursday
- UK BOE rate decision, Thursday
- US initial jobless claims, Thursday
- UK industrial production, GDP, Friday
- ECB publishes account of April policy meeting, Friday
- BOE Chief Economist Huw Pill speaks, Friday
- US University of Michigan consumer sentiment, Friday
- Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.6% as of 9:43 a.m. New York time
- The Nasdaq 100 rose 0.5%
- The Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 rose 0.4%
- The MSCI World index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0784
- The British pound rose 0.3% to $1.2584
- The Japanese yen fell 0.5% to 153.74 per dollar
Cryptocurrencies
- Bitcoin rose 0.3% to $63,966.78
- Ether fell 0.6% to $3,120.37
Bonds
- The yield on 10-year Treasuries was little changed at 4.50%
- Germany’s 10-year yield declined three basis points to 2.47%
- Britain’s 10-year yield declined six basis points to 4.22%
Commodities
- West Texas Intermediate crude rose 0.8% to $78.76 a barrel
- Spot gold rose 1.3% to $2,331.14 an ounce
