U.S. stock futures are suggesting the major indexes will have a mixed start to the day. In overnight trading, markets in Asia closed mostly up. Meanwhile, the major European indexes are slightly in the red. Elsewhere, oil prices have moved lower, with West Texas Intermediate (WTI) down about 1.3%, to around $68.50 a barrel.
Stocks started the last week of June in consolidation mode, with investors taking some profits off the table on several of the big tech names which have helped drive the markets higher in 2023. Even with yesterday’s setback, however, the NASDAQ is still showing a gain of about 27% for the year to date, putting it within throwing distance of its best first-half showing in 40 years. A good part of the rebound has been fueled by growing confidence that the Federal Reserve is close to the end of its long series of interest rate increases. Although the central bank passed on a rate hike at its last meeting in June, the majority of the Federal Open Market Committee’s (FOMC) members are calling for two more increases before the year is through. Assuming the Fed keeps to quarter-point increments, this would lift its overnight target lending rate to 5.5%-5.75%. Furthermore, the lead bank recently raised its 2024 Fed funds forecast from 4.3% to 4.6%. This suggests a less-favorable environment for stocks ahead as, historically, rising interest rates tend to drive investors toward income-generating assets, such as bonds, certificates of deposit, and money market funds.
On the economic front, this morning we received the report on Durable Goods orders for May, which showed an increase of $4.8 billion (1.7%), to $288.2 billion, versus the consensus expectation of a 0.9% decline. Later this morning, last month’s figures for new home sales are due, as well as the latest reading from the Conference Board’s Consumer Confidence Survey. Thursday brings the final revised figure for first-quarter Gross Domestic Product (GDP). Lastly, the Personal Consumption Expenditures (PCE) index for May is due to be released on Friday.
Summing up Monday’s price moves, the Dow Jones Industrials slipped 12 points or less than 0.1%, the S&P 500 fell 19 points lower (0.5%) and the tech-laden NASDAQ took the heaviest hit with a decline of 156 points (1.2%). – 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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