US stock indexes fell, suggesting that stocks may start in June with losses after limiting a month of volatile trading.
The S&P 500 fell 0.7% on Wednesday, and the top three U.S. indices recovered their morning gains. The Dow Jones Industrial Average fell about 0.5%, while the technology-focused Nasdaq Composite fell 0.7%. Ten of the 11 S&P 500 sectors have recently been in the red, with the exception of energy.
On Tuesday, major US indices fell, leading the S&P 500 to close May flat after a month marked by strong movements in both directions.
Wednesday’s session marks the start of a new month of trading, but few investors expect a break from the volatility that has dominated the markets this year. Many traders remain concerned about the pace of Federal Reserve interest rate hikes and whether they will plunge the US economy into a recession. According to Deutsche Bank analysts, eight of the Fed’s last 11 extended rate hike cycles have finally ended in recession.
However, many traders say that a recession is not guaranteed and that any major economic downturn in the US could be months away. This has led some investors to enter the market and get shares with reduced valuations, injecting more volatility into the markets.
Bargaining tables with fewer staff during the summer months could also spur volatility in the coming weeks. Summer trading tends to have lower trading volumes and less liquidity, leading to more dramatic stock movements. Many investors are also preparing for more volatility in other asset classes, which have also experienced large fluctuations this year.
Shanghai residents took selfies outside and toasted as the city emerged from a Covid-19 confinement that lasted more than two months. But there are economic challenges ahead, as China shows no signs of easing its Covid zero strategy. Photo: Qilai Shen / Bloomberg News
Many investors and strategists say they still question whether last week’s rebound, when the three major US indices rose by at least 6%, was the start of a more sustainable rise or if it was just a break. of this year’s sales pressure.
“Most of the gains we saw last week have been a rebound in the bear market,” said Chris Wallis, CEO and chief investment officer of Vaughan Nelson Investment Management. “I think we will have prolonged volatility, but sometime between June and September there is a good chance of reaching the bottom of the market.”
Mr. Wallis does not rule out the possibility of a recession, driven by a slowdown in global growth and rising inflation, this year.
The Fed’s clear signal of the need to raise interest rates by half a percentage point at the Fed’s policy meetings in June and July has offered traders peace of mind recently. What happens next, however, is less clear. Canada’s central bank on Wednesday raised its political interest rate by half a percentage point.
“The question for us is whether [the recent rally] It’s a one- or six-month phenomenon, “said Viraj Patel, Vanda Research’s global macro strategist, who said he expects US stocks to rise in the coming weeks in the absence of a big data crash. but it doesn’t.I still don’t think the stocks are ready for a long-term rebound.
In economic terms, the Institute for Supply Management’s U.S. manufacturing activity index rose to 56.1 in May from 55.4 in April. Economists polled by the Wall Street Journal expected a drop to 54.5. A reading above 50 indicates an expansion.
The yield on the 10-year U.S. Treasury note rose to 2.941% from 2.842% on Tuesday. Bond yields and prices are reversed. Benchmark yields are still well below this year’s closing high of 3.124%, but they have advanced this week as traders have continued to reassess interest rates.
The S&P 500 remained roughly flat in May, after a month of volatile trading.
Photo: Michael Nagle / Bloomberg News
Crude oil prices have risen as investors have digested European Union leaders’ plans to impose an oil embargo on Russia and a ban on insuring ships carrying Russian oil. Some OPEC members are also considering suspending Russia’s involvement in an oil production deal.
Brent crude, the international benchmark for oil prices, rose 1.4% to $ 117.25 a barrel. West Texas Intermediate, the U.S. marker, advanced 1.5% to $ 116.38. Although oil prices have fallen from their levels shortly after the start of the war in Ukraine, they have only recently begun to rise, as traders have digested the plans of European Union leaders and made them more flexible. Covid-19 restrictions in China.
“Oil prices have skyrocketed … and I think they’re likely to stay high,” said Susannah Streeter, a senior investment and market analyst at Hargreaves Lansdown. “I still believe that oil and high energy costs will be an inflationary factor that will weigh on markets.”
Salesforce rose 9.8% after reporting revenue that exceeded analysts’ expectations, easing concerns about demand for its business software. Shares of Victoria’s Secret rose 5.4% after recording a gain that exceeded analysts’ expectations.
Shares of energy companies fluctuated between gains and losses in volatile intraday trading. Marathon Oil added 1.2%, while Occidental Petroleum gained 1.8%.
The results will be presented later Wednesday by Hewlett Packard Enterprise and the GameStop meme stock.
Outside, the pan-continental Stoxx Europe 600 closed 1%.
In Germany, shares of DWS Group, Deutsche Bank’s asset management arm, fell 6.2%. The Frankfurt offices of Deutsche Bank and DWS Group were stormed on Tuesday by authorities on charges of ecological laundering of their investment funds. DWS said on Wednesday that its CEO was resigning.
In Asia, trade was mixed. China’s Shanghai Composite lost 0.1% as Covid-19 blockades eased in China’s financial capital. Hong Kong’s Hang Seng fell 0.6%. Japan’s Nikkei 225, on the other hand, rose about 0.7%.
Bitcoin was recently trading around $ 30,155, down 6.3%, while ethereum fell 6.7% to trade at about $ 1,846, according to CoinDesk data.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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