Last Updated 4:00 PM EST
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Stock indices finished today’s trading session in the red as investors await this week’s key inflation data. The Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) fell 0.17%, 0.46%, and 0.68%, respectively.
Furthermore, the U.S. 10-Year Treasury yield increased to 3.53%. The Two-Year Treasury yield also increased, as it hovers around 4.04%. This brings the spread between them to -51 basis points.
Despite New York Fed President John Williams’ remarks about not cutting rates this year (see previous update), the market is still pricing in rate cuts for 2023.
Indeed, Fed Funds futures indicate that investors are assigning a 41.3% chance of a rate in the range of 4.25% to 4.5% in December, along with a 33.5% probability of 4.5% to 4.75%. This equates to 50 to 75 basis points in rate cuts from now until the end of the year.
However, if the Federal Reserve does indeed keep rates steady throughout 2023, it could indicate that investors are potentially being too optimistic and overvaluing the market.
Last Updated: 2:05PM EST
Stocks are in the red so far in today’s trading session. As of 2:05 p.m. EST, the S&P 500 (SPX) and the Nasdaq 100 (NDX) are down 0.2%, and 0.5%, respectively. Meanwhile, the Dow Jones Industrial Average (DJIA) is near the flatline.
Earlier today, New York Fed President John Williams shared that he’s keeping a close eye on how tighter credit conditions affect the economy, jobs, and inflation. This comes as the Federal Reserve evaluates whether to put the brakes on interest rate hikes.
Williams pointed out that it takes time for monetary policy to influence the real economy and eventually bring inflation back to the 2% target. Recently, the Federal Open Market Committee bumped the benchmark rate up to a range of 5% to 5.25%, hinting that they might pause rate hikes depending on how the economy performs.
Although the market has been expecting a change in the Fed’s strategy, Williams didn’t dismiss the possibility of more rate increases, given that inflation is still above target. On the flip side, he doesn’t think there’s any reason to slash interest rates this year, as recent wage data suggests the job market remains tight.
Williams acknowledged that credit conditions continue to tighten, but it’s unclear how this will impact the economy. Despite this uncertainty, he believes the banking system is “sound and resilient.” Williams also mentioned the Fed’s vigilance regarding regional banks’ exposure to the struggling commercial real estate market.
Last Updated: 11:19AM EST
Stocks are in the red so far in today’s trading session. As of 11:19 a.m. EST, the Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) are down 0.1%, 0.3%, and 0.5%, respectively.
On Tuesday, the National Federation of Independent Business (NFIB) released its Small Business Optimism Index for the month of January. As the name suggests, it is a survey that measures the level of optimism among small businesses.
In April, the index decreased by 1.1 points to a level of 89. As a result, it has remained below its 49-year average of 98 for the last 16 months. In addition, 23% of small business owners cited inflation as their single largest concern related to operations. This was down from last month’s 24%.
Still, 33% of businesses in the survey said they raised selling prices. Of the small businesses that saw lower profits, 20% attributed the decline to higher material costs, while 10% pointed to labor costs. Weaker sales made up 29% of the blame.
This data highlights that consumer spending is still strong since 71% 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
Stocks opened in the red this morning as investors fear the worst should the U.S. default on its debt. The Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) are down 0.5%, 0.4%, and 0.2%, respectively, at 9:30 a.m. EST, May 9.
Treasury Secretary Janet Yellen stated yesterday that failure to raise the debt ceiling would be disastrous. Yellen also mentioned that the Federal regulators have not yet come up with a plan to contain the short selling in U.S. regional bank stocks, adding to investors’ woes.
On the economic front, traders eagerly await April’s Consumer price index (CPI) data due tomorrow, May 10. This will be followed by Producer price index (PPI) data on May 11. The inflation reading will give direction to the Fed’s next rate hike decision. Markets will also closely watch Federal officials speak in the days ahead and gauge any cues on the economic outlook and monetary policy.
On the earnings front, shares of big data analytics company Palantir (NYSE:PLTR) gained over 27% in after-hours trading yesterday after posting a solid earnings and sales beat. On the other hand, the stock of digital payment platform PayPal (NASDAQ:PYPL) is sinking in pre-market trading this morning despite reporting a top and bottom line beat. Similarly, shares of Lucid Group (NASDAQ:LCID) are also down over 8% in pre-market trading, following weaker-than-expected Q1FY23 results reported last evening.
Notable earnings reports expected today include those of electric vehicle (EV) maker Rivian (NASDAQ:RIVN) and travel & leisure company Airbnb (NASDAQ:ABNB). Meanwhile, entertainment giant Walt Disney (NYSE:DIS), Warren Buffett’s favorite oil stock, Occidental Petroleum (NYSE:OXY), and Chinese e-commerce giant JD.com (NASDAQ:JD) are scheduled to report later this week.
Elsewhere, European indices are trading in the negative zone today, as investors await key U.S. inflation data and the Bank of England’s rate hike decision due on May 11.
Asia-Pacific Markets Mostly in the Red
Most Asia-Pacific indices ended the trading session in the red today. China’s trade data showed that imports fell by 1.4% while growth in exports slowed to 8.5%.
Hong Kong’s Hang Seng, China’s Shanghai Composite, and Shenzhen Component indices ended the trading session down by 2.12%, 1.10%, and 1.12%, respectively.
At the same time, Japan’s indices bucked the trend, with the Nikkei and Topix ending the trading session up by 1.01% and 1.27%, respectively.
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