Stocks Finish Green Despite Rising Treasury Yields
Last Updated 4:15PM EST
Stocks ended a choppy Monday session in positive territory. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 were up 0.04%, 0.31%, and 0.41%, respectively.
Bonds continued to fall as the U.S 10-year Treasury Yield is now 3.045%, an increase of 10.4 basis points. Not much has changed for the price of crude oil as it has remained fairly steady in the $118 to $119 range throughout the day.
The consumer discretionary sector led the market, finishing 1% higher on the day. Right behind was the materials sector, which gained 0.93%. Conversely, the real estate sector (XLRE) was today’s biggest laggard as it declined by 0.32%.
In addition, the Conference Board released its Employment Trends Index report for the month of May. The index is comprised of eight labor-market indicators that are aggregated into a single number. For the month of May, the index declined to 119.77 compared to April’s 120.6.
This marks the second straight month of decline, the first time it has happened since the pandemic started. This suggests that jobs growth will be slowing down in the coming months ahead. Nevertheless, the labor market remains strong for the time being.
Inflation is Causing Americans to Tip Less
Last Updated 3:05PM EST
Stocks are up heading into the final stretch of the trading session. As of 3:05 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.01%, 0.32%, and 0.32%, respectively. Bonds fell a little more as the U.S 10-year Treasury Yield is now 3.034%.
The consumer discretionary sector is still leading the market at the moment, as it is 0.86% higher on the day. Right behind is the materials sector (XLB), which is 0.82% higher in today’s session. On the other hand, the technology sector is today’s biggest laggard as it trades 0.25% in the red.
Not much has changed for the price of crude oil, as it continues hovering in the $118 to $119 range.
Furthermore, a new survey from CreditCards.com shows that Americans are tipping less compared to the previous two years. This decline in tipping can be attributed to higher inflation and a tight labor market, which has made providing excellent service more difficult.
However, the number of Americans tipping did increase for hairstylists and barbers, even when compared to 2019 levels.
Nevertheless, this survey adds to the increasing pile of evidence that suggests the economy is slowing down and may actually lead to a recession.
Stocks Pull Back as U.S. Treasury Yields Rise, Economic Outlook is Negative Among Americans
Last Updated 12:15PM EST
Although off the highs, stocks are still green halfway into the trading session. As of 12:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.04%, 0.23%, and 0.05%, respectively.
Conversely, bonds continue to fall as the U.S 10-year Treasury Yield has now risen above 3%. Currently, the yield is hovering around 3.02%.
Stocks are no longer led by the financial sector, which has pulled back and is now up 0.5%. Consumer discretionary is the leading sector at the moment, as it is 0.6% higher on the day.
Crude oil continues to hover around the mid $118 range, although it did see a quick dip to a low of $117.63 per barrel.
Furthermore, a new Wall Street Journal-NORC survey finds that Americans do not have a positive outlook on the U.S. economy. 83% of respondents have a negative view, while 35% said they are not happy with their financial situation.
These findings shouldn’t really be a shock to anyone considering the persistent inflation and falling prices across most asset classes. In addition, households are increasingly tapping into their savings in order to support spending.
Stocks are in the Green to Kick Off the Week
Last Updated 10:15AM EST
Stocks have started the day strong, with major indices in the green after 45 minutes of trading. As of 10:15 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.99%, 1.38%, and 1.75%, respectively.
Stocks are being led by the financial sector (XLF), which is currently up 1.75%, followed by the technology (XLK) and consumer discretionary sectors (XLY).
On the other hand, bonds are down as the U.S 10-year Treasury Yield increased 5.1 basis points to 2.992%.
Crude oil continues to show strength, continuing its upward trend as Saudi Arabia increased the price of its Arab Light crude for Asia by $2.10 a barrel, higher than the expected $1.50 per barrel. The price of WTI is currently hovering around $118 to $119 per barrel.
In addition, shares of solar companies surged in premarket after news that President Biden will suspend tariffs on solar panels for 24 months. This move is the administration’s attempt at easing rising energy prices that have been worsened by the war in Ukraine. As of this writing, the Invesco Solar ETF (TAN) is up 5.4% on the day.
Pre-Market Update
Stock futures were trending in green in the early hours of Monday amid growing concerns of a recession resulting from aggressive interest rate hikes by the Federal Reserve. On the other hand, investors are also aware that the Fed’s hawkish stance on the soaring inflation is absolutely necessary to cool it down.
Futures on the Dow Jones Industrial Average (DJIA) were up 0.83%, while those on the S&P 500 (SPX) edged 1.1% higher, as of 4:49 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures moved above the flatline by 1.46%.
Last week was dismal with the major averages pulling back into the red zone yet again, as the market digested recent updates from the Fed that reiterated planned 50-basis-point rate hikes to be in quick succession, for June and July.
Meanwhile, May’s jobs report was a breather, revealing that 390,000 jobs were added despite raging inflation and fears of the economy slowing down. However, the possibility remains that these positive numbers are actually encouraging the Fed to stick to its aggressive monetary policy.
At first glance, it looks like U.S. consumers are still not tightening their hands significantly, while jobs keep being added to the economy. These trends have so far helped strengthen the dollar in the past year. However, the dollar has fallen slightly against a group of currencies in May. The WSJ Dollar Index, which tracks the strength of the dollar against 16 currencies, declined 1.1% last month.
Nonetheless, wage growth has slowed down on a year-over-year basis, and consumer spending is being supported by private savings (which, in turn, is depleting, and thus threatening to hurt GDP). Moreover, the U.S. service sector and real estate sales have slowed down as well, in April.
Importantly, the key economic data for May, the CPI (consumer price index), is due to be released this Friday. This data will show how the prices of essential consumer goods have gone up. Notably, the CPI is the best and most widely accepted indicator of inflation. Interestingly, economists predict a slight easing of inflation compared with April.
These mixed signals thrown by the economy are keeping investors at the edge of their seats.
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