Traders toil away on May 17, 2024, on the New York Stock Exchange.
Wednesday saw an increase in stock futures after lower-than-expected consumer inflation statistics for May.
In May, the consumer price index did not change, falling short of the 0.1% monthly gain predicted by Dow Jones. Also falling short of expectations was the 3.3% year-over-year rise in the inflation yardstick. Also below expectations were the monthly and annual figures for core CPI, which does not include the highly variable food and energy costs.
After a period of downward pressure due to fears that rising interest rates were stifling the economy, stocks recovered after the weak CPI news and yields fell. Financial institutions like Bank of America saw their stock prices rise. Both Lowe’s and Home Depot soared.
As investors’ risk appetites were reawakened by the lower inflation statistics, shares of technology companies like Nividia and Broadcom also climbed.Back below 4.3%, the yield on 10-year Treasuries fell again.
In spite of missing targets in the most recent quarter, Oracle’s stock rose 9 percent as investors focused on the software maker’s cloud agreements with Google and OpenAI.
Tuesday saw new closing highs for the S&P 500 and the Nasdaq Composite, propelled by investor rotation into Apple shares. At its developer conference this week, the iPhone manufacturer highlighted its push into artificial intelligence, which led to a surge in the stock. Among the three main averages, the Dow’s 0.31% decline stood out.
On Wednesday, the Federal Reserve will wrap up its two-day policy meeting. Following the decision on interest rates, Fed Chair Jerome Powell will hold a news conference, and investors will be watching with bated breath.
Investors are waiting for central bankers to update their Summary of Economic Projections, which might provide light on the direction of policy. Current market pricing suggests that the Fed will keep its benchmark overnight borrowing rate between 5.25 and 5.5%. Concerns among investors about a higher-for-longer interest rate environment have intensified in light of the recent good employment report and sticky inflation.
According to LPL Financial’s chief global strategist Quincy Krosby, “the market will be focused on any mention—within the Fed statement, the dot plot, or Chair Powell’s comments—of concerns regarding the labor market.” This is due to Powell’s remarks that indications of deterioration could prompt the easing of rates.
May consumer prices remain flat
Stock futures got a lift as a result of the consumer price index’s unexpectedly lower reading, which boosted hopes that inflation pressures are lessening.
Consumer price index was flat in May compared to the previous month and rose 3.3% year over year. Dow Jones surveyed economists who predicted a 0.1% month-over-month increase and a 3.4% year-on-year gain in consumer price index.
Similarly, the 0.2% month-on-month increase in core CPI, which excludes energy and food costs, was lower than anticipated. A 0.3% rise in core prices was anticipated.
— Frederic Rembert
The most actively traded stocks before the market opens
Before the market opens, here are a few of the stocks that have been moving the most.
According to CNBC’s David Faber, shares in Paramount Global fell 3.3% after National Amusements ended merger discussions with Skydance.
Oracle—The cloud services provider’s stock increased 7.4 percent on the announcement of partnerships with Google and OpenAI. In addition to partnering with Microsoft and OpenAI to increase computer capacity, Oracle is planning to make its database accessible to Google Cloud starting in November.
After Goldman Sachs downgraded Birkenstock to neutral from buy, the shares fell 2.6%. The stock has surpassed its luxury peer group, according to the bank, and is up over 21% so far this year.
If you want to know who else is making moves in the premarket, you should read the whole thing.
Michelle Fox
UBS predicts that the tone for the short term will be set by Wednesday’s economic developments for the markets.
Even if most market participants expect the Federal Reserve to keep interest rates steady on Wednesday, UBS still considers the event to be crucial since it will determine the market’s trajectory in the near future.
The bank said that investors would be watching for signs of falling prices and inflation beginning with May’s consumer price index report in the morning.
The quarterly publication of the dot plot, which tracks the interest rate expectations of senior Fed officials, will be the most specific measure for investors, according to the bank. “A dot plot that just swerves around one implied rate cut would probably make people more nervous, because it would indicate a more aggressive stance toward policy.”
The U.S. central bank is still expected to lower rates twice this year, according to UBS, with the first drop happening in September.
Han Lisa Kailai
Application for mortgages surges by almost 16% in a week
The Mortgage Bankers Association reported a 16% increase in total mortgage applications compared to the previous week, despite a small decline in interest rates.
“Refinancing activity was up significantly earlier in the week due to lower rates, especially for VA borrowers who took advantage of the opportunity to lower their rates,” said Mike Fratantoni, senior vice president and chief economist at MBA.
Diana Olick and Fred Imbert
- Higher opening for European markets
On Wednesday, European markets began the day on an upward trajectory, with the majority of sectors showing positive performance.
On 8:14 a.m. London time, the pan-European Stoxx 600 had gained 0.35 percent. Stocks in the automotive industry down 0.78 percent, while those in the banking sector up 0.84%.
Last but not least, the FTSE 100 in the United Kingdom was up 0.56%, the CAC 40 in France was up 0.35%, and the DAX in Germany was up 0.39%.
Sophie Kiderlin
The DoubleLine Second reduction planned for 2024, according to Gundlach’s dot map
During an investor webcast on Tuesday after the bell, DoubleLine Capital CEO Jeffrey Gundlach expressed his belief that the Federal Reserve’s so-called dot plot would indicate a prediction of just two rate cuts for this year.
Compared to the prior projection, which suggested three interest rate decreases for 2024, this would represent a decrease.
From now until the end of the year and beyond, the dot map shows the expectations of 19 FOMC members, both those who vote and those who do not, on the whereabouts of interest rates.
As the Federal Reserve keeps fighting inflation, the prominent fixed-income investor has previously predicted that there would be no more than one interest rate drop this year.
Li Yun
Largest after-hours movements in Oracle and Rentokil stock
See which firms are grabbing attention in the after-hours market:
Oracle
-Despite reporting disappointing fiscal fourth-quarter earnings, the tech company’s stock surged about 9 percent on the announcement of cloud partnerships with Google and OpenAI. Despite analysts’ expectations of $1.65/share on $14.55/billion in sales, Oracle reported adjusted profits of $1.63/share on $14.29B in revenue.
Rubrik
—The cloud data management company’s stock rose 1.4% as the company’s revenue for the first quarter surpassed expectations. In contrast to the $172 million predicted by LSEG’s panel of experts, Rubrik reported $187 million in sales for the time.
The initial public offering (IPO) of Rentokil, parent company of Terminix, saw a 7.5% increase in share price when Trian Partners, an investment firm run by Nelson Peltz, announced that it had become a top-10 stakeholder in the pest-control behemoth.
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“Pia Singh”
Little move in stock futures opening Evening of Tuesday
Just after 6 p.m. ET, stock futures finished the day marginally down. The S&P 500 futures fell 0.05 percent while the Nasdaq 100 futures fell 0.09 percent. Meanwhile, Dow futures fell to a level below the flatline.
