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Stocks Slip as Market Consolidates Gains, Eyes Fed’s Inflation Target


Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

On Monday, the S&P 500 ended the day lower, wiping out earlier gains that had brought the index to its highest level in nine months. The S&P 500 lost 0.2%, closing at 4,273.79, while the Nasdaq Composite dipped 0.09% to 13,229.43, and the Dow Jones Industrial Average dropped 0.59% to 33,562.86. Apple’s stock declined by around 0.8% after unveiling its virtual reality headset and software updates at its developers’ conference.

Intel also saw a 4.6% drop due to Apple’s announcement of a new chip, and Nvidia pulled back on valuation concerns. JPMorgan Chase and Goldman Sachs faced struggles following news of potential increased capital requirements for large banks. The market’s recent consolidation of gains came after a broad-based rally on Friday, buoyed by positive economic indicators and the passage of the debt ceiling bill.

While investors are hopeful about the economy and the recent market rally, concerns linger about the narrow focus on a few tech stocks and the potential for an intermediate-term correction if market breadth does not improve. The Federal Reserve’s target for managing inflation is a key factor that could impact market movements going forward.

Investors are eager to see if the central bank will revise its 2% inflation target. Despite these uncertainties, some analysts remain optimistic that the market can catch up and close the gap in other sectors as long as the economy continues to show resilience and avoid recessionary signs.

The overall stock market experiencing a slight decline

Data by Bloomberg

On Monday, the overall market experienced a slight decline of 0.20%. Among the different sectors, Communication Services saw a positive gain of 0.58%, followed by Utilities with a 0.45% increase. Health Care and Consumer Discretionary sectors also performed well, gaining 0.38% and 0.35% respectively. On the other hand, Materials experienced a slight decline of 0.10%. Consumer Staples, Real Estate, Information Technology, Financials, Energy, and Industrials all saw negative changes ranging from -0.35% to -0.71%.

Major Pair Movement

The US dollar weakened after the ISM services data revealed that a significant portion of the US economy was struggling to avoid contraction, with concerns about a potential recession. The decline in the ISM’s employment index, new orders, and prices paid contributed to the cautious market sentiment. This raised doubts about the possibility of a rate hike this month, supported by disinflationary data and indicators of a weaker labour market.

As a result, Treasury yields and the dollar reversed earlier gains, with expectations shifting towards a delay in rate increases. The euro-dollar exchange rate remained relatively unchanged despite the European Central Bank’s plans for future rate hikes. The British pound recovered slightly, while the US dollar against the Japanese yen experienced a decline. The market showed less willingness to pursue new Treasury yield and dollar highs, awaiting upcoming CPI data and Federal Reserve events.

In summary, the US dollar’s weakness reflected concerns about the struggling US economy and the potential delay in rate hikes by the Federal Reserve, leading to cautious market behaviour.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
AUDCash Rate12:303.85%
AUDRBA Rate Statement12:30

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.