US equity markets opened the week with modest changes compared to the previous close. The DOW Jones fell 0.42% to 33,286.58, the S&P 500 +0.016 to 4,192.63, and the NASDAQ 100 +0.50% to 12,720.78.
Stock futures rallied slightly on Tuesday morning after a crucial debt ceiling meeting between President Joe Biden and House Speaker Kevin McCarthy, though the two disagreed.
Futures linked to the Dow Jones Industrial Average show an increase of 30 points, corresponding to 0.10%. Additionally, S&P 500 and Nasdaq-100 futures are up 0.15% and 0.20%, respectively. The euro-dollar exchange rate shows slight stability at 1.8075, while the yield on the 10-year Treasury remains constant at the highs recorded in March at 3.71%.
Major Asian stock markets fell after US lawmakers disagreed on a debt ceiling. After reaching a 33-year high, the rally in Japanese markets has lost momentum. Indeed, the Nikkei 225 index reversed its initial gains and recorded a decrease of 0.47%, while the Topix lost 0.4%.
Japanese equities have experienced solid growth over the past two weeks, mainly driven by a joyous earnings season and expectations that the Bank of Japan will maintain the highly accommodative monetary policy.
Macroeconomic data showed dramatic growth in the country’s manufacturing sector in May, while the services sector hit a record high, indicating resilience in the world’s third-largest economy. The preliminary estimate of the Japanese manufacturing PMI index marked growth to 50.8 compared to the value of 49.5 in April.
Similarly, the corresponding reading for the services sector hit a record high of 56.3 compared with 55.4 the previous month. The composite index reached 54.9, hitting its highest since October 2013. However, with shares now trading at levels last seen during the 1990s bubble era, traders expect a consolidation period.
During the G7 meeting in Japan, the US president said he had positive expectations regarding improving relations between the US and China in the near term. Meanwhile, the last chance for a US debt ceiling hike is approaching. In addition, weaker-than-expected machinery orders data point to continued weakness in Japan’s manufacturing sector.
China has warned the country’s major IT infrastructure operators to avoid buying Micron Technology (MU) chips, citing “relatively serious” cybersecurity risks. Beijing is focusing on the US memory chip maker in response to export bans on US chips to China.
Federal Reserve Chairman Powell made an important announcement on Friday. In his statement, Powell indicated that the Fed may not need to hike interest rates as previously expected to counter rising inflation. This news surprised many watchful observers of the Fed’s moves and raised questions about the economy’s future. Powell cited market tensions as one of the reasons behind this decision.
Despite the current political deadlock in the US, investors are showing signs of confidence in reaching an agreement to raise the country’s debt limit. With the risk of a government shutdown and default on the horizon, many closely follow the negotiations between lawmakers on Capitol Hill.
However, despite the uncertainty, market analysts remain optimistic that a solution can be found before the deadline. This confidence can be attributed to several factors, including the recent passage of a bipartisan infrastructure bill and the Federal Reserve’s commitment to maintaining stable monetary policy. Despite the current political climate, there are still many unknowns.
On Friday, GOP negotiators agreed to suspend debt ceiling talks, arguing that President Biden’s White House demands were unreasonable. At the same time, a report surfaced that Treasury Secretary Janet Yellen had told bank executives that more mergers in the banking sector might be needed. This news hurt regional bank stocks on Friday, despite having rallied sharply over the week.
On Sunday morning, three returned from the Group of Seven meeting in Japan; President Biden called President McCarthy. McCarthy described the call as “productive” but stressed there was no deal yet, and the parties remained distant. Later, White House and GOP negotiators met on Sunday. Also, Biden and McCarthy are scheduled to meet on Monday.
On Monday, the European Union fined Meta Platforms (META) a record $1.3 billion for violating privacy rules by sending user information to the United States. As a result, META’s share value declined slightly.
Last week, the stock market continued its bull run, and many investors breathed a sigh of relief.
The Dow Jones made a modest weekly gain, the Nasdaq hit 2023 high, and the S&P 500 hit a new high at the end of the week. Even the struggling First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rallied significantly by 2.45%.
However, there was a noticeable gap between the leading and lagging stocks, with some stocks surging while others remained stagnant. As a result, investors are wondering about the market’s future and which stocks to bet on.
Price lists for Monday, 22 May 2023
DOW Jones -0.42% to 33,286.58
S&P 500 +0.016 to 4,192.63
NASDAQ 100 +0.50% to 12,720.78
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