03 June 2021

Wall Street Ends Higher Amid Spike in Meme Stocks

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News shaping
the markets today

     

What’s happening: US stocks closed slightly higher on Wednesday, after recording sharp gains earlier in the session.

What happened: US stock indices spiked in early trading on Wednesday, with the so-called “meme stocks” surging and investors keenly awaiting fresh catalysts in upcoming economic reports.

Stocks pared gains later in the session, as inflation concerns outweighed optimism around a faster economic rebound.

Why it matters: Wall Street ended with small gains on Wednesday, as investors looked for more catalysts, including the US jobs report, which is scheduled to be released by the Labor Department later this week.

Meme stocks surged sharply due to renewed interest from retail traders. Shares of AMC Entertainment Holdings jumped as much as 100% on Wednesday, a day after the company announced raising $230.5 million in new equity from Mudrick Capital. Meanwhile, the decline in Tesla’s shares, on reports of the company losing share in the EV market, weighed heavily on the S&P 500 and Nasdaq 100.

The US dollar also gave back some gains following comments from Fed officials around it being time to start discussing around tapering asset purchases. With the US economy recovering from the pandemic-led downturn, markets have been concerned about inflation, which could force the Federal Reserve to gradually withdraw its support for the economy and raise interest rates.

The yield on the 10-year Treasury note has not made significant moves in recent weeks, with investors busy changing their positions between growth and value stocks.

The Dow Jones index added 25 points to close at 34,600.38 on Wednesday, while the S&P 500 rose 0.14% to settle at 4,208.12 and the Nasdaq 100 gained 0.16% to reach 13,675.79.

What to watch: Investors await economic data on ADP employment, initial jobless claims, and services PMI from the US. Private businesses in the US, which hired 742,000 workers in April, are expected to add 650,000 jobs in May.

Analysts project a decline in initial jobless claims to 390,000, from 406,000 in the previous week. The projected figure represents the lowest level in initial jobless claims since the covid-19 outbreak in March 2020.

Friday’s NFP (non-farm payroll) report will remain in focus as it will provide a clearer picture of the current state of the labour market and guide the central bank in its decision to scale back asset purchases.

The Markets Today

     

Gold will be in focus today, after recording its highest finish since early January.

Context: Gold prices settled higher on Wednesday, as traders turned their focus to major US economic reports scheduled for the week.

Details: Gold, which is widely considered as a hedge against inflation, notched its strongest month of the year in May, rising around 8%.

“It is quite clear from Friday’s [consumer inflation] data that there are ongoing concerns about inflation emerging. This is all part of a developing story, and one which would develop very much in the second half of this year,” said independent analyst Ross Norman.

The US dollar traded slightly higher after paring most of the gains recorded earlier in the session on Wednesday. The dollar index, which tracks the currency versus a basket of major rivals, rose by 0.1%, limiting the gains for gold. A stronger greenback makes the yellow metal more expensive for traders holding other currencies.

Gold prices were supported by lower yields for US government bonds, with the yield on the 10-year US Treasury shedding 2 basis points to reach 1.60% on Wednesday.

August gold gained 0.3% to close at $1,909.90 an ounce, notching its highest settlement since January 7. Silver also rose by 0.4% to reach $28.20 an ounce, following a 0.3% rise on Tuesday.

Among other metals, July copper fell 1.3% to $4.59 a pound. September palladium closed at $2,868.60 an ounce, up 0.2%, while July platinum slipped 0.6% to $1,192.70.

What to watch: Traders will keep an eye on major US economic reports, especially Friday’s jobs data.

The covid-19 pandemic remains one of the top concerns for markets, with total global infections exceeding 171.5 million.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, German DAX 30, French 40 and STOXX Europe 600 up by 0.39%, 0.23%, 0.49% and 0.28%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Russia’s composite PMI and services PMI, Turkey’s consumer price index, producer price inflation and foreign exchange reserves, South Africa’s IHS Markit PMI, Spain’s services PMI and composite PMI, Italy’s services PMI and composite PMI, France’s services PMI and composite PMI, Germany’s services PMI and composite PMI, Eurozone’s services PMI and composite PMI, UK’s services PMI and composite PMI, Mexico’s consumer confidence, as well as US Challenger job cuts, unit labour costs, nonfarm labour productivity, composite PMI, ISM non-manufacturing PMI, natural gas stocks and crude oil inventories.

 

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