S&P 500, NASDAQ hit new records: Fed meeting, what to expect from CPI data – Analysis and Forecast – June 11, 2024

The S&P 500 and Nasdaq both hit record highs on Monday, even as investors remained cautious ahead of this week’s consumer price data and Federal Reserve policy announcements.

Nvidia (NVDA.O) shares rose 0.7% after a 10-for-1 stock split, providing some support to the Nasdaq and S&P 500. Some investors now believe the chipmaker could be included in the Dow.

The May CPI report is scheduled to be released on Wednesday, at the end of the Federal Reserve’s two-day meeting.

The central bank is expected to keep interest rates on hold as it releases its latest economic and policy outlook. Investors will be watching closely for signs of a possible rate cut in the future.

“It’s an important week for the markets in terms of Fed comments and statements,” said Quincy Crosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“Furthermore, the CPI report is due on Wednesday morning. Everything related to the economy and inflation is viewed by the markets through the prism of the Fed’s actions,” he added.

The Dow Jones Industrial Average (.DJI) rose 69.05 points (0.18%) to 38,868.04. The S&P 500 (.SPX) rose 13.8 points (0.26%) to 5,360.79, and the Nasdaq Composite Index (.IXIC) rose 59.40 points (0.35%) to 17,192.53.

Traders have lowered their expectations for a September rate cut after stronger-than-expected May employment data was released on Friday, leaving the chance of a cut at 50%.

Apple (AAPL.O) shares fell 1.9% on the first day of its annual iPhone developer conference, as investors eagerly awaited news on how the company plans to integrate artificial intelligence into its products.

Among the day’s top performers was Southwest Airlines (LUV.N), which rose 7% after activist investor Elliott Investment Management acquired a $1.9 billion stake in the company.

Diamond Offshore Drilling (DO.N) rose 10.9% after oilfield services company Noble (NE.N) announced it was acquiring a rival for $1.59 billion. Noble also rose 6.1%.

On the New York Stock Exchange, rising stocks outnumbered declining stocks by 1.06 to 1, and on Nasdaq, rising stocks outnumbered falling stocks by 1.01 to 1.

The S&P 500 recorded 19 new 52-week highs and five new lows, while the Nasdaq Composite recorded 56 new highs and 177 new lows.

Trading volume on U.S. exchanges totaled 10.39 billion shares, lower than the 20-day average of 12.8 billion shares.

MSCI’s global stock index rose on Monday despite key U.S. inflation data and investor expectations about upcoming central bank meetings. But the euro fell after French President Emmanuel Macron announced early elections.

U.S. Treasury yields rose as investors digested Friday’s labor market data and looked ahead to this week’s consumer price data and Federal Reserve statement. Attention was also focused on the Bank of Japan’s future decisions.

Adding to the uncertainty was political instability in the euro zone’s second-largest economy. The far-right’s victory in Sunday’s European Parliament elections led Macron to call a general election.

The euro hit its lowest level in a month against the dollar, and European stock markets also fell.

“Uncertainty comes from a variety of sources,” said Chad Oviat, director of investment management at Huntington National Bank. “The European elections over the weekend have added volatility to the markets.”

The STOXX 600 index, which covers pan-European stocks, closed 0.27% lower. France’s blue-chip CAC 40 index fell 1.4% to its lowest level in more than three months.

However, the MSCI Global Stock Index (.MIWD00000PUS) changed from a downtrend to an uptrend at the end of the session, and Wall Street partially recovered the gains. Accordingly, the global index rose 0.75 points, or 0.09%, to 794.99.

Huntington National Bank’s Oviat said investors are eagerly awaiting the release of U.S. Consumer Price Index (CPI) inflation data on Wednesday morning ahead of the Federal Reserve’s policy decision on Wednesday afternoon.

Adding to the uncertainty about the impact of economic data on the Federal Reserve’s interest rate policy was Friday’s jobs report, which showed the U.S. economy added significantly more jobs in May than expected and that annual wage growth accelerated again.

“Everyone seems to be hoping for a rate cut, but so far that hasn’t happened.” So everyone is looking at the CPI data Wednesday morning, and hopefully we’ll get more information and commentary from the Fed in the afternoon. Jim Barnes, director of bonds at Bryn Mawr Trust in Berwyn, Pa., sought to clarify the situation:

U.S. Treasury yields, which move inversely to prices, rose on Monday, reflecting expectations of a rise in long-term U.S. interest rates.

The benchmark 10-year Treasury yield rose 4.1 basis points to 4.469% from 4.428% late Friday. The 30-year yield also rose 4.8bp to 4.5958%.

The two-year yield, which typically reacts to changes in interest rate expectations, rose 1.5 basis points to 4.8846% from 4.87% late Friday.

In the foreign exchange market, the euro fell 0.37% against the US dollar to $1.076, falling to its lowest level since May 9. Earlier, the euro hit its lowest level against the pound in almost two years.

The dollar index, which measures the greenback’s strength against a basket of currencies including the euro and Japanese yen, rose 0.08% to 105.14. Against the Japanese yen, the dollar rose 0.21% to 157.03.

The Bank of Japan (BOJ) will hold a two-day monetary policy meeting this week and may present new guidance on reducing large-scale bond purchases.

In the commodities sector, oil prices hit their highest in a week on expectations of a recovery in fuel demand this summer. However, gains were limited as the dollar strengthened and expectations of a U.S. interest rate cut waned.

U.S. crude oil rose 2.93% to $77.74 per barrel, and Brent crude oil rose 2.52% to $81.63 per barrel.

Gold prices clawed back losses after their biggest decline in 3.5 years in the previous session as investors awaited inflation data and a policy statement from the Federal Reserve.

Spot gold rose 0.72% to $2,309.15 per ounce.