Wall Street is dominated by declines. The Dow Jones interrupted its upward trend

Luc Williams

The Dow Jones Industrial dropped 0.21% at the close. and amounted to 39,431.51 points. The S&P 500 lost 0.02% at the end of the day. and amounted to 5,221.42 points. The Nasdaq Composite rose 0.29%. and closed the session at 16,388.24 points. The Russell 2000 index of small-cap companies is up 0.18%. up to 2,063.39 points The VIX volatility index increases by 8.37%, to 13.60 points.

“Markets will focus on inflation in the services sector excluding housing rentals and energy”

A survey by the New York Federal Reserve found that consumers last month increased their expectations for price increases in both the short and long term. On an annual basis, inflation expectations increased to 3.3%. Their five-year forecast increased to 2.8%. The stock gave up early gains after the survey results were released.

The publication of the consumer price index report is scheduled for Wednesday. Economists expect April growth of 0.4%. month to month and 3.4 percent year over year, according to Dow Jones. The producer price index, due for release on Tuesday, is expected to rise 0.3% last month.

Barclays analysts point out that growth stocks are currently benefiting from improved forward guidance in the US. “Rates have fallen from recent highs following the Fed's dovish turn, further improving growth prospects,” wrote strategist Venu Krishna. “We remain positive on economic growth in the United States, while neutral on values ​​in both regions, given that peak rates are now behind us,” he added. Krishna also reiterated his positive stance on US large-cap companies compared to their smaller counterparts.

“In the U.S., large-cap exposure to quality and sales/EPS growth styles (topics we are positive on), along with the interest rate risk facing highly leveraged small-caps, leads us to remain positive on large over small,” he added .

This week, investors' attention will be focused on April inflation data from the US. The reading will be published on Wednesday at 2:30 p.m. Polish time. According to LSEG data, investors are currently pricing in interest rate cuts in the US by 42 basis points. by the end of 2024, with the probability of a September rate cut of 25 bp. at the level of 63 percent

“After the upside surprise in the first quarter, markets will focus on inflation in the services sector excluding residential rentals and energy. Following a 36 basis point increase in core CPI in March, I expect any increase of a similar or larger magnitude to trigger a negative market reaction, while any material downside surprise will provide relief and increase the likelihood of additional Fed rate cuts through the end of the year,” he said Ronald Temple, chief market strategist at Lazard.

“We view the overall risk-return outlook for the stock as balanced.”

Morgan Stanley said in a report that it sees signs that the U.S. economy is slowing, with disinflation expected to return in the April CPI reading and accelerate in the second half of 2024. “The coming weaker monthly readings, along with faster disinflation beginning in the second half of 2024, should reassure the Fed the confidence it needs that inflation remains on a sustainable path towards its target. We maintain our view that the Fed will cut interest rates three times this year – but starting in September, not July – with two more cuts in November and December,” the report said.

UBS Global Wealth Management strategists, led by Mark Haefele, expect the Fed to cut interest rates by 50 basis points this year, starting in September. They also expect geopolitical tensions in the Middle East to persist.

“We are positive on fundamentals and view the overall risk-return outlook for the stock as sustainable. Corporate earnings are solid and AI-related companies can drive further market growth,” Haefele and colleagues at UBS wrote in the report.

Arm Holdings shares rose almost percent. after Nikkei Asia reported that the SoftBank Group-backed chip designer plans to develop AI chips and plans to bring the first products to market in 2025. GameStop shares surged 74%. after a person known on social media as Roaring Kitty, whose online posts helped spark the company's big gains on the stock market in 2021, posted her first post on the X platform (formerly Twitter) after three years.

Kenvue lost almost 1%. after health care giant Johnson & Johnson announced it would divest itself of all of its 9.5 percent. shares in the manufacturer of Tylenol. According to FactSet data, 92 percent companies from the S&P 500 index that have so far presented their reports for the first quarter, almost 80 percent exceeded Wall Street analysts' forecasts. On May 22, Nvidia, the last company from the so-called The Magnificent Seven. Companies publishing Q1 results this week include: Walmart, Home Depot, Alibaba and Cisco.

“The simple interpretation of financial market performance is that there is more strength in the global economy than expected, and higher interest rates are unlikely to negatively impact global GDP growth,” said Bruce Kasman, head of economic research at JPMorgan.

On the oil market, WTI contracts for June increase by 1.20%. to USD 79.21 per barrel, and July Brent futures increase by 0.82%. up to USD 83.46/b.


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