Last Updated 4:05 PM EST
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Stock indices finished today’s trading session in the green. The Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) gained 0.49%, 0.67%, and 0.93%, respectively. The healthcare sector (XLV) was the session’s laggard, as it only gained 0.02%. Conversely, the energy sector (XLE) was the session’s leader, with a gain of 2.2%.
Furthermore, the U.S. 10-Year Treasury yield decreased to 3.98%, whereas the Two-Year Treasury yield increased, as it hovers around 4.88%. This brings the spread between them to -90 basis points.
Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for December 2023. In fact, the market’s expectations for a rate in the range of 5.5% to 5.75% increased to 32.2% compared to yesterday’s expectations of 28.7%.
In addition, the market is now also assigning a 10.5% probability to a range of 5% to 5.25%. For reference, investors had assigned a 13.7% chance yesterday.
Last Updated: 1:00PM EST
Stocks are in the green so far in today’s trading session. At the time of writing, the Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are up 0.2%, 0.4%, and 0.6%, respectively. On Tuesday, the National Federation of Independent Business (NFIB) released its Small Business Optimism Index for the month of May. As the name suggests, it is a survey that measures the level of optimism among small businesses.
In June, the index increased by 1.6 points to a level of 91, which was better than expected. However, it has remained below its 49-year average of 98 for the last 18 months. In addition, 24% of small business owners cited inflation as their single largest concern related to operations. This was down from last month’s 25%.
Still, 29% of businesses in the survey said they raised selling prices. Of the small businesses that saw lower profits, 24% attributed the decline to higher material costs, while 10% pointed to labor costs. Weaker sales made up 28% of the blame.
This data highlights that consumer spending is still strong since 72% of respondents who saw a decline in profits didn’t blame weaker sales. However, it demonstrates the impact that inflation has on profitability, as the higher revenue figures actually led to operating deleverage, meaning that earnings didn’t grow faster than sales.
Last Updated: 9:30AM EST
Broader U.S. indices are inching higher on Tuesday morning, continuing the positive momentum from yesterday’s trading session. The Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are up 0.15%, 0.25%, and 0.48%, respectively, at 9:34 a.m., EST, July 11.
Traders are keenly awaiting June’s inflation print due tomorrow to gauge whether the previous interest rate hikes have had any material impact on curbing inflation. The consumer price index (CPI) data is scheduled for release at 8:30 a.m., EST, July 12, and the producer price index (PPI) report is due at the same time, the next day, July 13.
Experts are projecting a 3.1% increase in the CPI reading for the twelve months ending June 30, lower than the 4% annual rise in May. Markets have largely priced in a 25 basis point rate hike in the upcoming FOMC meeting, set for July 25-26. Even so, the U.S. labor market remains resilient and keeps an overhang on an already hawkish monetary policy. The Federal Reserve will enter the Blackout Period on July 15, following the latest CPI and PPI prints.
Most importantly, the earnings season could kick off with some spark towards the end of the week. Notable financial companies reporting earnings this week include JPMorgan Chase & Co. (JPM), BlackRock (BLK), Citigroup (C), State Street (STT), and Wells Fargo (WFC). Similarly, non-financial companies’ releases include PepsiCo (PEP), Delta Airlines (DAL), and Conagra Brands (CAG).
Elsewhere, European indices are trading mixed this morning following the U.K.’s record-high wage growth figures. Britain’s wages grew at the joint-fastest rate in the three months ending May 30, by 7.3% compared to the same period last year. At the same time, the unemployment rate leaped to 4% in the three months leading up to April. The Bank of England has adopted an aggressive rate hike policy to tame record-high inflation amid a resilient economy.
Asia-Pacific Markets End in Green
Asia-Pacific indices ended in the green on Tuesday, following the Chinese government’s step to extend outstanding loans to the ailing property sector in the nation. The revised rule will allow Chinese real estate developers to defer loan payments up to 2024, thus providing ample liquidity to shore up the sector. At the same time, Chinese tech stocks took a breather on the assumption that regulators had ended the crackdown on tech companies.
Hong Kong’s Hang Seng and China’s Shanghai Composite and Shenzhen Component indexes ended higher by 0.87%, 0.55%, and 0.78%, respectively.
Similarly, Japan’s Nikkei finished up by 0.04% while the Topix index ended down by 0.31%.
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