US stocks drifted Tuesday as a rotation into financial shares bolstered hopes the breadth of the benchmark’s rally might soon extend beyond technology.
(Bloomberg) — US stocks drifted Tuesday as a rotation into financial shares bolstered hopes the breadth of the benchmark’s rally might soon extend beyond technology.
The S&P 500 was little changed after earlier gains in regional banks, while a loss in Apple Inc. took the air out of a rally in technology stocks. The Russell 2000 was also 2.5% higher.
“It’s too early to say if this is bottom-fishing or a real bet that the most economically sensitive stocks — many of which are unprofitable — are the place to be,” said Steve Sosnick, chief strategist at Interactive Brokers. “But the outperformance that we saw in RTY on Friday and today is very much worth watching because it could explode the narrowing breadth concerns.”
The S&P 500 is on the edge of a bull market. However, the mood across global markets has been cautious with some questioning if markets have run up too fast on the hype for artificial intelligence.
“It’s easy to think about tech as a proxy for equities overall,” said Michael Reynolds, vice president of investment strategy at Glenmede. But “if we were to see a broader expansion of the breadth in the market, that would be confidence in the economic picture showing up.”
The World Bank said in a report Tuesday the global economy is in a precarious situation as sharp interest-rate increases hit activity and stir vulnerabilities in lower-income countries. Those fears have suppressed equities. But with the rate of US inflation still high, traders increasingly expect the Federal Reserve will hold rates steady at its June meeting, while keeping the option for hikes later on open. Former vice-chair Richard H. Clarida also said Tuesday it was unlikely the US central bank will start cutting rates until 2024.
“I just think there are so many investors out there who are so negative,” said Sam Stovall, chief investment strategist at CFRA. Typically, stocks rise after a Fed pause, “implying that if we don’t eclipse or close above that 20% threshold [of a bull market] beforehand, that we probably would do so shortly thereafter.”
Treasury yields rose and the dollar was little changed.
In commodities, oil gave up gains off news of Saudi Arabia’s supply cut, sending energy stocks including Chevron Corp. lower. Wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south. Meanwhile, gold was little changed.
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Elsewhere, the euro weakened and German bonds gained after the European Central Bank said euro-area consumer inflation expectations eased significantly in April.
Australia unexpectedly hiked on Tuesday and kept the door open to further increases, sparking a rally in the country’s currency.
And in Turkey, the lira dropped for an 11th day, on track for its longest run of losses in more than a year, amid speculation of less government intervention in markets.
Key events this week:
- China forex reserves, trade, Wednesday
- US trade, consumer credit, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventory data, Wednesday
- Eurozone GDP, Thursday
- Rate decisions in India, Peru, Thursday
- Japan GDP, Thursday
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 12:42 p.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average fell 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.0688
- The British pound fell 0.1% to $1.2423
- The Japanese yen was little changed at 139.64 per dollar
Cryptocurrencies
- Bitcoin rose 2.1% to $26,170.32
- Ether rose 2.2% to $1,845.36
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.70%
- Germany’s 10-year yield was little changed at 2.37%
- Britain’s 10-year yield was little changed at 4.21%
Commodities
- West Texas Intermediate crude fell 0.5% to $71.81 a barrel
- Gold futures rose 0.2% to $1,978.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Namitha Jagadeesh, Lynn Thomasson and David Watkins.
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