The investing community watched benchmark averages finish higher on Monday as market participants prepare for the Federal Reserve's latest policy decision and inflation data due later in the week.
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At the end of Monday, the Frontline Dow (dji) cattle 0.1%the S&P 500 benchmark index (SP500) added 0.2%and the tech-focused Nasdaq Composite (COMP: IND) scaling 0.3%.
In terms of sector posture, eight of the 11 S&P segments concluded the session in green, with utilities at the top of the list. At the other extreme, the financial sector is the one that has suffered the most.
Treasury yields were mixed after Friday's rally. The shorter US 2-year Treasury yield (US2Y) fell 1 basis point to 4.88%. At the same time, the yield on the long-dated 10-year US Treasury bond (US10Y) rose 3 basis points to 4.46%. Additionally, Société Générale highlighted some key technical levels for both the US2Y and US10Y.
See here how other yields trade along the entire yield curve.
“While the short-term technical trend remains bullish, market breadth has worsened significantly in recent weeks, and the S&P-500 equal-weighted index has underperformed its market cap-weighted peer since March 2024,” said Seeking Alpha analyst Ahan Vashi.
Regarding the Federal Reserve's upcoming interest rate decision, Vashi added: “Despite the ECB and BOC starting the rate cut cycle last week, it is unlikely that the US Federal Reserve will .cut rates at this meeting; “However, any major changes to the dot plots could trigger volatility in global financial markets.”
In terms of stocks that were on the move, Southwest Airlines (LUV) stood out 7% while prominent activist investor Elliott Investment Management confirmed a $1.9 billion stake in the airline.
At the other end of the spectrum, shares of semiconductor company Advanced Micro Devices (AMD) fell. 4.5% the day after Morgan Stanley downgraded the company, citing a belief that investor expectations are “too high” for its artificial intelligence business.
Monday's economic calendar was light as investors focused their attention on two mega-events scheduled for Wednesday: the Federal Reserve's interest rate decision and consumer price index data for May.
“Powell's press conference will certainly offer nuance on any changes, and will have the ability to give them a dovish or hard spin. Optionality with little specific guidance will likely be preferred at this stage,” said Deutsche Bank's Jim Reid.
“Our forecast that the Federal Reserve will ease monetary policy by a total of 125 basis points this year, starting in September, is based on the idea that the labor market is slowing sharply,” Pantheon Macroeconomics said.
