Stocks Finish Monday’s Session in Negative Territory
Last Updated 4:25PM EST
Stock indices finished Monday’s trading session in negative territory. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 0.2%, 0.3%, and 0.81%, respectively.
Only three sectors finished the day in the green, with energy being the best performer, gaining over 3% after being the only sector that saw a weekly decline last week. On the other hand, the consumer discretionary sector (XLY) was today’s laggard, with a decline of over 1%.
However, WTI crude is currently hovering around $110 per barrel, which is near the session’s high. The commodity had another volatile day; its daily range was $105.61 to $110.52.
Conversely, gold saw its price fall 0.2% despite the Group of Seven nations announcing that they were banning imports of Russian gold. The precious metal had initially seen its price go up early in today’s session.
Furthermore, Treasury yields saw an increase today, with the U.S. 10-Year Treasury yield at 3.21%, an increase of 7.6 basis points. Similarly, the Two-Year Treasury yield is at 3.13%, bringing the spread between them to only 8 basis points.
In addition, after pricing in a higher chance of a 3.25% to 3.5% Fed Funds rate in December, investors now expect an equal probability of a rate between 3.25% to 3.5% or 3.5% to 3.75%. Both scenarios are being priced at a 39.6% chance. Nevertheless, expectations seem to have remained relatively steady recently as investors try to navigate the economic uncertainties.
Pending Home Sales Increase During the Month of May
Last Updated 3:00PM EST
Equity markets are in the red heading into the final hour of Monday’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.3%, and 0.7%, respectively.
On Monday, the National Association of Realtors released its Pending Home Sales report, which measures the month-over-month change in the number of home sales that have yet to close but are contracted to be sold. This measure excludes homes that are newly constructed.
During May, Pending Home Sales grew 0.7% over April, which was significantly better than the expected -3.9% decline. This breaks a six-month streak of declines that started with the December report. Nevertheless, year-over-year comparisons were still down substantially by 13.6%.
As a result, the overall trend in sales is downwards, as the cost of borrowing continues to increase and more houses hit the market. This has also caused houses to sit for longer periods of time on the market because there are fewer buyers who now have more options to choose from.
Core Durable Goods Orders Come in Better than Expected
Last Updated 12:00PM EST
Stock indices are mixed halfway into Monday’s trading session. As of 12:00 p.m. EST, the S&P 500 and the Dow Jones Industrial Average were both up 0.2%. Meanwhile, the Nasdaq 100 fell 0.1%
On Monday, the Census Bureau released its U.S. Core Durable Goods Orders report for the month of May, which measures the change in order value for long-lasting big-ticket items. This report excludes the impact of aircraft orders because they tend to be very volatile. Therefore, it is generally agreed upon that the core reading provides a better gauge of ordering trends.
For the month of May, Core Durable Goods Orders grew by 0.7%, which was better than the expected 0.3% on a month-over-month basis. When including aircraft orders, growth was also 0.7%, which also beat expectations of 0.1%. This demonstrates that demand for big-ticket items is still strong as consumers continue to spend.
However, it is important to remember that this is a lagging indicator, meaning that the current demand has the potential to be much lower as inflation continues to impact people’s purchasing power. Nonetheless, it appears that the market likes what it sees from today’s report.
Stocks are Red to Start Monday’s Trading Session
Last Updated 10:00AM EST
Stocks are negative 30 minutes into Monday’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.4%, and 0.4%, respectively.
The communications sector (XLC) is the laggard so far, as it is down 0.9%. Conversely, the energy sector (XLE) is the session’s leader with a gain of 1.7%.
WTI crude oil had received an initial boost in price after the Group of Seven leaders announced that they are working towards increasing sanctions on Russian oil. The plan is to figure out a way to cap the price. However, WTI is now down on the day, as it trades around $107 per barrel after hitting a high of $108.78 per barrel earlier on.
Meanwhile, bonds are pulling back from their recent rally as the U.S. 10-Year Treasury yield is now hovering around 3.166%. This represents a gain of 3.2 basis points from Friday’s close and a significant increase from last week’s low of 3%.
Similar movements can be seen with the Two-Year yield, which is now at 3.077%. Nevertheless, the spread between the 10-Year and Two-Year U.S. Treasury yields remains narrow, as it currently sits at 8.9 basis points.
Pre-Market Update
Stock futures moved higher early Monday morning in what appears to be fresh optimism after last week’s bounce back, as investors try to balance out their portfolio at the end of the quarter.
Futures on the Dow Jones Industrial Average (DJIA) moved 0.17% higher, while those on the S&P 500 (SPX) climbed 0.26%, as of 6:50 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures advanced by 0.38%.
On Friday, the S&P 500 closed 3.06% higher, while the Dow and the Nasdaq 100 bounced 2.68% and 3.49%, leading the indexes to end in green for the first time since May.
Importantly, this week holds a few key economic data releases which will give investors an updated look into the economic situation. The latest data on durable goods orders is expected to be released before the markets open on Monday. Moreover, the latest home sales report is also expected to be out later in the day.
On the other hand, the U.S. Treasury yields are on an upward trek in response to the Federal Reserve’s monetary policy move, as it threatens to gradually raise the federal government’s borrowing costs higher than presently expected.
Meanwhile, the Bank for International Settlements (BIS) highlighted some important yet concerning points. It said that more aggressive interest rate lifts by the world’s central banks are required to avoid the disastrous combination of high inflation and stunted economic growth — something which the U.S. had experienced in the 1970s. The BIS also said that the interest rates should be hiked despite putting the economy at risk of a recession.
Although the Federal Reserve, and the central banks of Australia, Canada, New Zealand, Switzerland, and Norway recently announced higher-than-expected interest rate hikes, they are still much below zero in terms of real policy rates.
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