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What’s happening: The S&P 500 settled lower on Friday, with Wall Street closing out a major week.
What happened: Investors assessed the Federal Reserve’s interest rate decision, along with encouraging inflation data last week.
The benchmark index closed the week in the green, while recording its strongest performance since March.
Why it matters: As widely expected, the Federal Reserve kept interest rates unchanged after its June meeting concluded last week, and after raising rates for ten consecutive meetings.
US central bank official said there could be two more rate hikes this year, as inflation continues to remain elevated. There had been speculations of rate cuts towards the end of 2023. Fed Chairman Jerome Powell indicated that rate cuts were at least two years away.
Investor sentiment was lifted by inflation data, which came in at the lowest level in two years. The consumer price index rose 0.1% in May, while the annual rate eased to 4% in the month, from 4.9% in April. That annualised growth in consumer prices was the smallest since March 2021. Core inflation rose 0.4% month-over-month and by 5.3% from a year ago. Producer prices for final demand also eased 0.3% month-over-month in May, following a 0.2% rise in April.
Economic data released on Friday showed consumer inflation expectations declining in June, with one-year inflation expectations falling to 3.3%, from 4.2% in May. The University of Michigan consumer sentiment figure climbed to 63.9 for June, notching the strongest level in four months.
Most sectors closed in the red on Friday, with communication services stocks leading the decline.
A downturn in Microsoft’s stock weighed on the S&P 500 and Nasdaq 100 index on Friday. Microsoft’s stock eased after settled at record high on Thursday.
The Dow Jones index shed 108.98 points, or 0.32%, to close at 34,299.12 on Friday, The S&P 500 fell 0.37% to 4,409.59, while the Nasdaq 100 declined 0.67% to 15,083.92. However, the Dow Jones index gained 1.2% for the week, while S&P 500 added 2.6%, recorded its fifth weekly gain in a row. US markets remained closed on Monday for the Juneteenth holiday.
What to watch: Investors await the release of economic data on housing starts and building permits today. Building permits in the US, which fell by 1.4% to an annual rate of 1.417 million in April, are expected to rise 0.6% in May. Analysts expect housing starts to decline by 1.2% in May, following a 2.2% rise in the previous month.
Context: Bitcoin staged a strong recovery over the past few days, approaching the $27,000 level.
Details: Bitcoin had surged to $31,000 in April. However, the biggest cryptocurrency in terms of market capitalisation has been on a broad downturn since mid-April, and recently hit lows of around $24,750.
The correction drove the overall crypto market valuation from $1.26 trillion to $1.02 trillion. Bitcoin’s dominance has increased to 48%, with investors steering away from altcoins due to uncertainties around the global economy.
Bitcoin bulls made a strong comeback last week, leading to the coin breaching the $26,900 level. BlackRock, the world’s biggest fund manager with around $10 trillion in assets, filed an application with the US SEC (Securities and Exchange Commission) for a spot Bitcoin ETF (exchange-traded fund). Several new Bitcoin ETFs could make an entry into the market in case the SEC approves BlackRock’s application.
Bitcoin traded higher by 3.7% to $26,943 on Monday, while Ethereum rose 0.4% to $1,732 this morning.
What are expectations: Traders will watch BlackRock’s application for a Bitcoin ETF, which could prove to be a catalyst to the overall crypto sector.
Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.71%, 0.96%, 1.01% and 1.02%, respectively.
Russia announced a widespread overnight air attack on Ukraine, targeting the capital and several cities. Despite this, the safe-haven US dollar index fell slightly this morning.
The People’s Bank of China cut two key lending rates for the first time in ten months, exerting pressure on the CNY/USD forex pair.
New Zealand’s Westpac-McDermott Miller consumer confidence index climbed to 83.1 in the second quarter, from 77.7 in the prior period. However, the index still signalling low levels of confidence sent the NZD/USD pair lower in forex trading this morning.
US NAHB/Wells Fargo Housing Market Index climbed by 5 points to 55 in June, beating expectations of 51 and lending support to the USD/EUR forex pair.
Canada’s industrial producer prices fell by 1% in May, versus market estimates of a 0.7% decline. The news sent the CAD/USD pair lower in forex trading this morning.
Germany’s producer price inflation, South Africa’s leading business cycle indicator, Eurozone’s current account and construction output, Italy’s current account, Mexico’s retail sales, Turkey’s government debt, as well as Brazil’s Federal tax revenues.
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