The Nasdaq 100 erased early gains after the tech-heavy benchmark notched its best-ever first half of a year. Stocks wavered in subdued trading after a measure of US factory activity contracted.
(Bloomberg) — The Nasdaq 100 erased early gains after the tech-heavy benchmark notched its best-ever first half of a year. Stocks wavered in subdued trading after a measure of US factory activity contracted.
Tesla was the day’s outperformer, gaining 5.7% after the electric-car company reported record quarterly sales, leading shares of rivals and battery suppliers higher. Tech giants Microsoft Corp., Apple Inc. and Alphabet Inc. dragged on equities benchmarks while volume on the S&P 500 was 13% below the 30-day average at this time of day ahead of the Independence Day holiday Tuesday.
Investors are tempering expectations for stocks in the second half of the year after strong gains and inflows so far. While central banks have kept up their hawkish rhetoric, signs of moderating US inflation have fueled big gains across technology shares.
If an economic slump fails to materialize and political crises can be averted inflation could bottom out at 3% before resuming a climb, according to Jim Bianco, president and founder of Bianco Research.
“If the inflation rate bottoms at three and starts drifting higher, the Fed’s going to find this unacceptable, and that two rate hikes that we have priced in for the rest of the year will happen, if not three,” Bianco said on Bloomberg Television.
The manufacturing sector painted a bleak picture as US factory activity fell to its weakest level in more than three years in data released Monday. Production and new orders data also suggested a pullback.
Traders are looking to the upcoming earnings season and additional data such as Friday’s nonfarm payrolls for clues on the health of the economy.
This week’s incoming data is likely to have more impact on the Federal Reserve’s September rate decision over July’s said Ian Lyngen, a strategist at BMO Capital Markets.
“The Fed is on a glidepath to another hike barring a dramatic shift lower in the realized data and/or a sharp tightening in financial conditions,” he wrote in a note.
After the positive start to the year there are still signs of cracks beneath the surface as the US yield-curve inversion intensified Monday, indicating investors expect Fed policy to rein in future growth. The two-year note’s yield exceeded the 10-year rate by as much as 110.8 basis points, approaching a level last seen in the early 1980s, according to data compiled by Bloomberg.
Read more: Treasury Yield-Curve Inversion Approaches Multi-Year Extreme
“With both global and US stocks more than 20% above their October 2022 lows and a more challenging second-half outlook, we believe investors should position for more lackluster stock market performance through the remainder of the year,” Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, said.
Nikolaos Panigirtzoglou, global market strategist at JPMorgan Chase & Co. said “stocks have done well in the first half because a US recession didn’t happen.”
The tech trade, he added, has turned into “a pain trade for institutional investors, causing them to capitulate. This first-half back drop creates vulnerabilities for the second half as it means if a US recession happens, there would be a rather abrupt market repricing.”
Crude prices steadied around $70 a barrel after Saudi Arabia’s state-run news agency said the country will prolong its unilateral oil production cut by one month, keeping a lid on supply even as the market is expected to tighten. Its OPEC+ ally, Russia, also announced fresh curbs on exports.
Also in focus this week will be US Treasury Secretary Janet Yellen’s trip to Beijing on July 6-9 as the world’s two largest economies look to mend ties after a spate of bilateral tensions.
Key events this week:
- Australia interest rate decision, Tuesday
- US Independence Day national holiday. Financial markets closed, Tuesday
- China Caixin services and composite PMI, Wednesday
- Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
- OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
- FOMC issues minutes on June policy meeting, Wednesday
- New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
- US initial jobless claims, trade, ISM services, job openings, Thursday
- Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- The S&P 500 was little changed as of 11:29 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0913
- The British pound fell 0.1% to $1.2684
- The Japanese yen fell 0.2% to 144.58 per dollar
Cryptocurrencies
- Bitcoin rose 1.1% to $30,937.48
- Ether rose 2.5% to $1,966.99
Bonds
- The yield on 10-year Treasuries was little changed at 3.84%
- Germany’s 10-year yield advanced four basis points to 2.43%
- Britain’s 10-year yield advanced five basis points to 4.44%
Commodities
- West Texas Intermediate crude rose 0.4% to $70.91 a barrel
- Gold futures rose 0.3% to $1,934.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Elizabeth Stanton, Anchalee Worrachate and Namitha Jagadeesh.
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