The U.S. stock market may experience some downward pressure at the opening bell this morning, following yesterday’s weak session. Once again, investors have become worried about rising bond yields and the Federal Reserve’s reluctance to reduce interest rates. As we were preparing this report, the S&P 500 Index futures were down about down about 14 points ( -0.25%) in early morning trading.
Investors received some important economic news this morning. According to the second estimate, GDP (Gross Domestic Product) increased at an annualized rate of 1.3% during the first quarter. This reading was in line with expectations, and shows that the economy is still expanding and that a recession is probably not looming on the horizon. Tomorrow, the nation’s battle with inflation will take the spotlight, when the PCE (Personal Consumption Expenditures) Price Index will be published. Analysts currently think the numbers will show that prices rose about 2.7% during the month of April, year over year. Notably, inflation has remained stubbornly above the Federal Reserve’s 2% target for some time, despite a restrictive monetary policy. This has made it difficult for the central bank to justify lowering interest rates, and has also created bouts of volatility in the equity and fixed-income markets.
In the corporate arena, many widely-held technology companies are still posting profit reports. Yesterday after the market closed, Salesforce (CRM), a leading provider of enterprise software, delivered a mixed report and issued soft guidance. The stock, which is a member of the Dow Jones Industrial Average, is coming under some pressure this morning. In contrast, HP Inc. (HPQ), a popular computer hardware manufacturer, just reported solid numbers and hinted at a recovery in the PC marketplace. Today, we will hear from Dell Technologies (DELL), a computer hardware company that has been gradually gaining market share.
Technically, the stock market has been holding up well, despite some recent volatility. We have noted that the technology sector has been showing leadership again. This development is likely a plus, since technology issues can be quite dynamic and have the ability to push the market meaningfully higher. Lately, investors have been very enthusiastic about advances in artificial intelligence, cloud computing, data analytics, autonomous driving, and even robotics. However, it remains to be seen just how this technology will develop, and which companies will actually benefit. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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