As we head into the first session of the holiday-shortened week of trading, U.S. stock futures are indicating a negative open. In overnight trading, markets in Asia were mixed. Meanwhile, the major European indexes are hovering around the unchanged mark. Elsewhere, oil prices have moved lower, with West Texas Intermediate (WTI) down about 1.3%, to around $70.80 a barrel.
Although the major averages ended last week on a down note, investors have benefited from a solid streak for equities leading up to last week’s decision by the Federal Reserve to pass on a rate hike. Notably, the broad S&P 500 stock index has racked up five positive weeks in a row, while the tech-heavy NASDAQ boasts eight consecutive weeks in the win column. However, the Fed’s skipping an increase does not necessarily mean that the market is poised for smooth sailing ahead. Although Chairman Jerome Powell noted that policymakers have not yet decided what their next move will be, half of the Federal Open Market Committee’s (FOMC) 18 members expect two more rate hikes ahead. This means the target rate, which currently stands at 5%-5.25%, would rise to at least 5.5%-5.75% in 2023. Additionally, the lead bank is now forecasting a Fed funds rate of 4.6% next year, versus its previous call of 4.3%.
On the economic front, this morning we received the housing start figures for May, which showed a surprise jump of 21.7%, to a seasonally adjusted annualized pace of 1.63 million units, versus 1.34 million in April. Consensus estimates were looking for a dip of 0.8%, versus a 2.2% increase the month before. Meanwhile, building permits (a more forward-looking indicator) increased 5.2%, to a rate of 1.49 million. Forecasts had called for 1.43 million, versus 1.15 million the previous month. The rest of the calendar this week is relatively light, with existing home sales and U.S. leading economic indicators for May due out Thursday.
Summing up Friday’s price moves, the Dow Jones Industrials were down 108 points (0.3%), the S&P 500 moved 16 points lower (0.4%), and the tech-centered NASDAQ trailed the pack with a loss of 93 points (0.7%). – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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