U.S. stocks are slightly down on Monday as investors anticipate key inflation reports and the Federal Reserve’s latest interest rate decision.
The S&P 500 fell 0.2% in early trading, remaining near last week’s record high. The Dow Jones Industrial Average decreased by 74 points, or 0.2%, at 9:37 a.m. Eastern time, while the Nasdaq composite also dropped 0.2%.
Huntington Bancshares saw a significant decline of 4.5% after lowering its profit forecast for this year. Conversely, Diamond Offshore Drilling surged 8.5% following Noble’s agreement to purchase the company in a deal worth approximately $1.6 billion. Noble’s stock rose 1.5%, reflecting traders’ positive outlook on the merger.
Apple slipped 0.3% ahead of a conference where it is expected to reveal advancements in artificial intelligence. The excitement around AI has propelled stocks to new heights, despite concerns about high interest rates and a slowing U.S. economy.
Recent economic data has been mixed, and traders are hoping for a moderate slowdown that eases inflationary pressure. Such a scenario could prompt the Federal Reserve to reduce its main interest rate, currently at its highest in over two decades. An optimal rate cut could potentially reinvigorate the slowing economy and stave off a recession.
Wall Street remains optimistic despite these uncertainties. Companies benefiting from the AI surge continue to show significant growth, with Nvidia maintaining a market value close to $3 trillion, even after a 0.1% dip on Monday morning.
Treasury yields were mixed as the market awaits reports on inflation at both the consumer and wholesale levels later this week. A key report on future inflation expectations, closely watched by the Federal Reserve, is also due.
On Wednesday, the Federal Reserve will announce its latest interest rate decision. While no change is expected, policymakers will release updated forecasts for future interest rates and economic conditions. In March, Fed officials projected about three rate cuts in 2024, but this forecast is likely to be revised. Wall Street traders are now anticipating one or two rate cuts in 2024, according to CME Group data.
In the bond market, the 10-year Treasury yield increased to 4.45% from 4.43% on Friday, while the two-year yield, which is more sensitive to Fed expectations, edged down to 4.88% from 4.89%.
In international markets, France’s CAC 40 index fell 1.9% after President Emmanuel Macron dissolved the National Assembly following unexpected European Parliament election results, where far-right parties made significant gains, causing the euro’s value to drop. Other European markets also declined, but not as sharply as France’s.
Asian markets ended mixed. Tokyo’s Nikkei 225 index rose 0.9% after data showed Japan’s economy contracted less than initially thought in the first quarter. South Korea’s Kospi fell 0.8%, while markets in Shanghai, Hong Kong, and Australia were closed for holidays.
Featured Image: Freepik @ wirestock
