Mixed results for U.S. stocks as inflation concerns mount

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14th MAy 2024 – (New York) On Monday, U.S. stocks closed with a mixed performance as traders grappled with growing inflation expectations ahead of crucial upcoming reports. The Dow Jones Industrial Average experienced a decline of 81.33 points, or 0.21 per cent, settling at 39,431.51, thus halting an eight-day winning streak. Similarly, the S&P 500 dipped by 1.26 points, or 0.02 percent, reaching 5,221.42. Bucking the trend, the Nasdaq Composite Index rose by 47.37 points, or 0.29 per cent, to 16,388.24.

Out of the 11 main sectors in the S&P 500, nine ended the day in the red. Industrials and financials were the primary laggards, declining by 0.45 per cent and 0.41 per cent, respectively. Conversely, the technology and real estate sectors saw gains of 0.48 per cent and 0.29 per cent, respectively.

Federal Reserve Vice-chair Phillip Jefferson stressed the importance of maintaining a steady monetary policy stance until clear evidence emerges that inflation is once again moderating towards the 2 per cent target. Jefferson stated, “I think it is appropriate to keep the policy rate in restrictive territory.”

A New York Federal Reserve survey released on Monday revealed that US consumers have heightened expectations for price increases in the near and longer terms. The survey attributed this to elevated inflation in home prices, fuel costs, and energy expenses. On a one-year basis, inflation expectations rose to 3.3 per cent, marking the highest level since November 2023. Meanwhile, the five-year outlook increased to 2.8 per cent.

Barclays noted that in Europe, value stocks continue to outperform, while in the US, growth stocks are currently experiencing gains due to improved forward guidance. Additionally, the recent dovish turn by the Federal Reserve led to a decline in rates from their recent highs, further enhancing the outlook for growth, according to strategist Venu Krishna.

Market participants are keeping a close eye on upcoming events such as the release of the consumer price index and Nvidia earnings, which are expected to impact trading activity in the coming weeks. UBS asset allocation head Jason Draho highlighted the potential impact of these events, stating, “Inflation and Nvidia earnings data that exceed expectations could set the stage for an early summer melt-up.”

Meme stocks, including GameStop and AMC Entertainment, witnessed notable surges on Monday. GameStop shares closed up 74.4 per cent at $30.45, with trading volume reaching its highest level since March 2021. Similarly, AMC Entertainment experienced a 78.35 per cent jump in stock price. These movements align with the broader trend observed in meme stocks.