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Wall Street’s major averages on Monday kicked off a big week on a positive note, helped by a jump in growth stocks. Investors looked ahead to a host of central bank rate decisions and data on consumer inflation.
The tech-heavy Nasdaq Composite (COMP.IND) advanced 1.53% to close at 13,461.92 points, after posting a seven-week win streak in the previous session. The S&P 500 (SP500) ended up 0.93% at 4,338.93 points, with the benchmark index pushing further into a bull market. The blue-chip Dow (DJI) added 0.56% to settle at 33,066.33 points.
Of the 11 S&P sectors, eight finished in positive territory, led by a more than 2% rise in Technology and a more than 1% rise each in heavyweight sectors Consumer Discretionary and Communication Services. Energy topped the losers.
Market participants are gearing up for a stacked calendar in the days ahead. The spotlight will no doubt be on the Federal Reserve, which will commence its two-day meeting tomorrow. According to the CME FedWatch tool, markets are still pricing in a solid 79% probability of no rate hike on Wednesday followed by a ~56% chance of a 25 basis point increase in July. Rate decisions will also be undertaken by the European and Japanese central banks.
Additionally, traders will be receiving key data on U.S. inflation, with the consumer price index (CPI) report due on Tuesday and the producer price index report set for Wednesday. On Monday, the New York Fed’s survey of consumer expectations for May showed a fall in short term inflation expectations.
“On the cusp of May’s CPI inflation report and the Fed’s June FOMC meeting, major U.S. equity indices broke out to new 52-week highs in today’s session with Big Tech and Semis once again leading the charge higher,” Ahan Vashi, investing group leader of The Quantamental Investor, told Seeking Alpha. “On the index level, we are in a new bull market; however, economically-sensitive (cyclical) sectors such as Energy and Financials remained under pressure throughout the day.”
“Interestingly, I see a noteworthy divergence between the S&P 500 (SP500) and the CBOE Volatility Index (VIX). Typically, SP500 and VIX move in opposite directions; however, VIX is +7.5% as of writing despite a +1% move in SP500. With volatility jumping up in such a fashion, equities may see an imminent reversal or pullback with the CPI report or the Fed meeting,” Vashi added.
The S&P 500 (SP500) posted marginal gains last week, but the highlight was the benchmark index snapping its longest bear-market run since the 1940s. However, there are some concerns over the sustenance of the rally, partly due to the fact that it has been driven by only a small group of heavyweight stocks. BTIG on Monday argued that the current market breadth and credit conditions remain inconsistent with a new bull market.
Taking a look at the fixed-income markets, Treasury yields were slightly lower. The longer-end 10-year yield (US10Y) was down 2 basis points to 3.73% while the more rate-sensitive 2-year yield (US2Y) was down 3 basis points to 4.57%. Meanwhile, the dollar index (DXY) was higher by 0.08% to 103.61.
Among active stocks, cruise line operators saw an upswing after JPMorgan turned more constructive on the sector. Carnival Corp (CCL) and Norwegian Cruise Line Holdings (NCLH) ended among the top percentage gainers on the S&P 500 (SP500).
Nasdaq (NDAQ) topped the S&P percentage losers after the exchange operator said it would acquire a financial software maker for $10.5B.
KeyCorp (KEY) also closed among the top S&P percentage losers after its finance chief warned of softer than anticipated quarterly net interest income.
