Stocks edged slightly higher on Monday, as the markets tried to bounce back from another week in the loss column. Investors welcomed news that Beijing was easing some of its Covid-19-related restrictions, perhaps signaling further reopening in China, which would help relieve some of the supply-chain congestion across the globe. While that nation’s return to producing at full capacity would provide a boost to the global economy and ease some product shortages, it is not likely to help reduce inflationary pressures.
The Federal Reserve, for its part, is planning to continue raising short-term rates to curtail demand and get rising prices under control. The lead bank is widely anticipated to implement increases of half a percentage point at each of its next two meetings in June and July. Interest rates on bonds have been rising this year, with the yield on 10-year Treasuries doubling to 3.04%. Traditionally, as interest rates on fixed-income securities rise, stocks become less attractive to investors. This year has been no exception, with the major market indexes losing ground in seven of the last eight weeks. The other problem is, if the Fed goes too far or too fast, there’s the risk of sending the economy into a recession, and this is also weighing on the equity markets.
For this reason, the market will be paying particular attention to Thursday’s jobs data, and the consumer price index reading for May, which will be announced on Friday. Investors will be looking for confirmation that the Fed’s actions are gaining traction and that perhaps the lead bank can soon ease the pace of monetary tightening and effect a “soft landing” for the U.S. economy.
All told, the Dow Jones Industrial Average gained 16 points yesterday, the S&P 500 moved up 12 points, and the tech-heavy NASDAQ advanced 48 points. Most of the major market sectors ended the day in positive territory, with the largest gains coming from consumer discretionary, communication services, and materials, all of which gained about 1%. Energy shares were the laggards for the day, closing just below breakeven. Elsewhere, the price of West Texas Intermediate was down slightly, to about $118.50 a barrel. Meanwhile, natural gas futures hit a 13-year high of $9.35 per million British thermal units (BTUs) thanks to high temperatures on the way and lower production.
Looking ahead to the new day, U.S. stock futures are suggesting the major indexes will start today’s session to the downside. Elsewhere, Asian markets were mixed overnight, while stocks in Europe are in the red. Meanwhile, oil futures are down slightly, to around $118.30 a barrel.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
