On Monday, the US benchmark equity indexes experienced a mixed close as investors awaited crucial inflation data scheduled for release later this week. The Dow Jones Industrial Average saw a decline of 0.4%, finishing at 39,357, while the Nasdaq Composite edged up by 0.2% to 16,780.6. The S&P 500 remained relatively unchanged, closing at 5,344.4.
Within sectors, real estate and communication services experienced the sharpest declines, whereas technology stocks led the gainers. The economic landscape is steered by the anticipated release of the official US producer prices report for July on Tuesday. Following this, consumer inflation data is due on Wednesday.
Market forecasts suggest that the consumer price index might have increased by 0.2% on a sequential basis and 3% annually last month, reflecting the consensus compiled by Bloomberg. In commentary, financial services firm Stifel noted, "Coupled with a cooler July employment report, any minimal improvement in price pressures will likely be enough to prompt the proverbial green light to reduce the federal funds rate." This statement underscores the delicate balance the Federal Reserve is attempting to maintain in terms of interest rates amid fluctuating price pressures. Additionally, the Federal Reserve Bank of New York reported that US consumers' inflation expectations for the medium term hit a record low last month, while both short- and longer-term outlooks remained steady.
This development suggests a cooling sentiment regarding inflation pressures among consumers at least in the near future. In response to inflation challenges, the Federal Open Market Committee (FOMC) of the central bank has tightened monetary policy significantly, raising the federal funds rate by 525 basis points between March 2022 and July 2023.
However, the committee has opted to keep interest rates unchanged in recent meetings, with the last pause occurring just last month. In the bond markets, the US 10-year treasury yield fell by 3.7 basis points to settle at 3.91%. The two-year rate also dropped, decreasing by 3.2 basis points to 4.02%.
This movement suggests a cautious sentiment among investors as they digest upcoming economic indicators. The commodities market saw West Texas Intermediate crude oil prices surge by 3.6%, reaching $79.62 per barrel. This increase reflects the ongoing global dynamics that continue to influence oil prices. Moreover, geopolitical tensions are stirring, with reports from The Wall Street Journal indicating that Israel has placed its military on high alert due to heightened concerns regarding a possible response from Iran and Hezbollah following the assassination of militant leaders in Tehran and Beirut. In corporate news, JetBlue Airways ($JBLU) experienced a sharp decline in its stock price, falling nearly 21% after announcing plans for a $400 million private placement of convertible senior notes due in 2029.
Conversely, KeyCorp ($KEY) benefited from a $2.8 billion investment from the Bank of Nova Scotia ($BNS) in exchange for a minority stake in the US bank, with KeyCorp shares soaring 9.1%, making it the top gainer on the S&P 500. In contrast, Scotiabank's US-listed stock declined by 3.6% due to market reactions. Technology giant Nvidia ($NVDA) was also among the key gainers on both the S&P 500 and Nasdaq, rising by 4.1%.
Analysts from UBS Securities expect Nvidia to report stronger-than-expected fiscal second-quarter results later this month, buoyed by robust performance in its data center business. Retail heavyweights Walmart ($WMT) and Home Depot ($HD) are also poised to release their quarterly financial results later this week, drawing attention from investors. Interestingly, a note from Oppenheimer Asset Management indicated that results from S&P 500 companies thus far have helped alleviate bearish expectations of an earnings recession.
Approximately 455 companies within the benchmark equity index have already disclosed their results in the current cycle, revealing an overall performance that veers more positively than negatively. In precious metals, gold and silver prices increased by 1.6% each, hitting $2,512.30 per troy ounce and $28.04 per ounce, respectively.
This movement reflects a safe-haven demand amid the prevailing economic uncertainties..