Investors are hoping the markets will continue their recent momentum, after the major indexes rallied Friday to break their longest losing streaks in decades. Traders appeared more encouraged after the latest inflation figures indicated that price increases could finally be decelerating. However, even with last week’s sizable gains, the Dow and S&P are still in correction territory (down 10% and 14%, respectively, from their highs) while the NASDAQ remains in a bear market, having fallen more 25% from its peak.
The forces that have dragged stocks down this year, namely the Federal Reserve’s plans to continue raising interest rates, slowing economic growth, and Russia’s conflict with Ukraine remain ongoing concerns. Notably, the latter continues to have far-reaching implications. Following Finland’s application to join NATO (the North Atlantic Treaty Organization), Russia retaliated by cutting off natural gas shipments to that country. Prior to this, the price of natural gas in the U.S. recently hit its highest level since 2008, at over $9 per million British thermal units (BTUs). Just this year alone, the cost of the commodity has jumped about 150%. Meanwhile, the European Union has taken another big step with its sanctions against Russia, having recently reached an agreement on an oil embargo. The move is intended to induce further economic punishment, reducing Russia’s ability to fund its war efforts. Unsurprisingly, oil prices are now at their highest levels in two months.
While the U.S. markets were closed in observance of Memorial Day, the European bourses closed mostly in positive territory Monday. Traders there were encouraged that China had eased back on COVID-19 restrictions, paving the way for manufacturing to pick up in that nation. Stocks in Asia also had a strong day.
Looking ahead to the new day, U.S. stock indexes have opened sharply lower. Elsewhere, Asian markets were mixed overnight, while stocks in Europe are mostly in negative territory. Meanwhile, oil prices have jumped 3.65, to around $119.00 a barrel.
On the economic calendar this week, this morning we get the Consumer Confidence Index’s reading for May. Wednesday brings the Institute for Supply Management’s (ISM) May report on manufacturing, where a slight deceleration is expected. We’ll also get totals for construction spending in April, as well as early reports on Motor vehicle sales for May. Thursday brings us the latest figures on initial and continuing jobless claims, as well as factory orders for April. Lastly, on Friday we’ll get May’s readings on nonfarm payrolls, the unemployment rate, and ISM’s Services report for May, among others.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
