S&P 500 rally stalls at nearly 5,500 as US yields rise: markets rally

(Bloomberg) — Stocks struggled to gain much traction after a rally that pushed the market to record highs, with recent data mainly pointing to economic weakness that could hamper the outlook for corporate earnings.

Most read from Bloomberg

The S&P 500 briefly reached the historic mark of 5,500 points. The Nasdaq 100 fell after a seven-day rally. Dell Technologies Inc. rose after Chief Executive Officer Michael Dell said the company is working with Nvidia Corp to build a “Dell AI factory” for Elon Musk’s startup xAI. After nearly recovering this year’s losses, government bonds retreated.

The Fed’s Kashkari says there will be 2% inflation within one to two years

“Bullish momentum remains intact for the S&P 500 and Nasdaq, but near-term overbought conditions combined with deteriorating breadth leave stocks vulnerable to a pullback or correction,” said Craig Johnson of Piper Sandler.

Initial U.S. jobless claims were little changed last week at 238,000, after a big jump in the previous period, in data that tends to be volatile around holidays and school holidays. Construction of new homes fell to the slowest pace in four years in May as higher-for-longer rates undermined the sector’s momentum from earlier this year. The June Philadelphia Fed Index fell short of expectations.

The S&P 500 fluctuated. The ten-year government bond yield rose by five basis points to 4.27%. The dollar rose. Traders are betting that the Bank of England will cut interest rates in August after policymakers signaled their willingness to ease monetary policy.

As the S&P 500 marches from one record high to another, fewer and fewer stocks are participating in this year’s rally. Nearly a third of voters hit a single-month low last month, according to data compiled by Bloomberg through the end of last week. That’s much bigger than those pushing it higher. In fact, only 3.2% reached a one-month high, including Apple Inc. and high-flying Nvidia Corp., which just beat Microsoft Corp. passed by and became the most valuable company in the world.

“With demand for AI remaining robust and the technology likely to disrupt and transform industries in the coming years, we believe it is important for investors to ensure they are adequately invested,” said Solita Marcelli of UBS Global Wealth Management.

Over the past three months, the index’s 10 largest stocks by market capitalization — mostly tech giants — have posted an average gain of 17%, while the rest have lost 1.3%, according to data compiled by Bloomberg Intelligence equity strategist Gillian Wolff.

Moreover, a slew of measures show that market breadth remains weak, adding to uncertainty about the continued strength of the rally. Take the NYSE Advance-Decline Line, a popular indicator that tracks the number of rising securities minus the number of falling securities each day in the stock market. On Friday, the price closed at a new six-week low.

Business highlights:

  • Kroger Co.’s revenue rose last quarter, and that was enough to win over investors struggling through mixed results from U.S. retailers.

  • Hertz Global Holdings Inc. is looking to raise $750 million in a two-part junk bond offering as the company tries to shore up its balance sheet after a misstep in its electric fleet.

  • Honeywell International Inc. agreed to acquire aerospace and defense company CAES Systems from private equity firm Advent International for $1.9 billion.

  • Accenture Plc reported better-than-expected new bookings for the third quarter, including a rise in its generative artificial intelligence offering to more than $900 million.

  • BP Plc expanded its biofuels business in Brazil by agreeing to take full control of a joint venture with Bunge Global SA.

  • On June 25, McDonald’s Corp. kicking off a marketing blitz and a new $5 meal deal, raising the stakes in what is shaping up to be an all-out battle between American restaurants desperate for inflation-battered diners.

  • Major drugmakers will lose billions in sales in the coming years as patents on some of their most lucrative drugs expire. According to TD Cowen, this is the perfect time to buy shares at a discount.

  • Gilead Sciences Inc.’s experimental biennial injection prevented 100% of HIV cases in women and adolescent girls in Africa, the first successful major trial of what was expected to be a powerful new drug regimen to ward off the virus.

Main events this week:

  • Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

  • Sales of existing homes in the US, Conf. Board leading index, Friday

  • The Fed’s Thomas Barkin will speak on Friday

Some of the major moves in the markets:

Shares

  • The S&P 500 was little changed at 10:17 a.m. New York time

  • The Nasdaq 100 fell 0.2%

  • The Dow Jones Industrial Average rose 0.3%

  • The Stoxx Europe 600 rose 0.6%

  • The MSCI World Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.2% to $1.0726

  • The British pound fell 0.3% to $1.2685

  • The Japanese yen fell 0.4% to 158.66 per dollar

Cryptocurrencies

  • Bitcoin was little changed at $64,850.3

  • Ether fell 1.1% to $3,512.81

Bonds

  • The yield on ten-year government bonds rose by five basis points to 4.27%

  • The German ten-year yield rose by four basis points to 2.45%

  • The British ten-year yield remained little changed at 4.06%

Raw materials

  • West Texas Intermediate crude rose 0.9% to $82.27 a barrel

  • Spot gold rose 1% to $2,351.07 an ounce

This story was produced with the help of Bloomberg Automation.

Most read from Bloomberg Businessweek

©2024 BloombergLP

Leave a Comment