U.S. stocks were mostly higher Monday, with the S&P 500 consolidating near a 10-month high andtrading not far off the threshold that would see it exit a bear market as expectations firm that the Federal Reserve will not raise interest rates this month.
Meanwhile, shares of Apple Inc.
AAPL,
were on track to close at a record high ahead of a WWDC developer event, where the company is expected to preview a mixed-reality headset.
What’s happening
-
The Dow Jones Industrial Average
DJIA,
-0.18%
fell 84 points, or 0.2%, to 33,683. -
The S&P 500
SPX,
+0.30%
was up 2 points, or less than 0.1%, at 4,285. A close above 4,292.44 would mark an exit from the large-cap benchmark’s long run in bear-market territory. -
The Nasdaq Composite
COMP,
+0.57%
advanced 18 points, or 0.1%, to 13,258.
See: S&P 500 nears bear-market exit. Will Big Tech’s rally finally spread to the broader stock market?
What’s driving markets
The S&P 500 on Monday was looking to consolidate, having rallied in recent sessions on the removal of fears of a U.S. debt default and on hopes that the labor market is showing an economy that can avoid a sharp slowdown in the face of the Federal Reserve’s inflation battle.
The Wall Street barometer surged 1.5% on Friday after data showed the U.S. created net 339,000 jobs in May, much more than expected, but with cooling wage growth and a rising unemployment rate that may allow the Fed to pause its rate-hiking cycle in June.
Investors were also weighing the implications of the resolution of the debt-ceiling crisis on liquidity. Having run down its cash balance, the Treasury Department is set to unleash a deluge of bills that could drain liquidity from the financial system and raise short-term borrowing costs, said Seema Shah, chief global strategist at Principal Asset Management.
See: ‘Potent liquidity squeeze’ threatens stock market once debt-ceiling deal is done
That could offer another challenge for beleaguered banks, she said.
Meanwhile, investors “are now re-focusing on sticky inflation and the extremely tight labor market, prompting a repricing of the market’s rate outlook. Not only is a further policy rate hike likely, but rate cuts this year are being steadily priced out,” Shah said.
Traders are now pricing in a 78% chance that the Fed will leave interest rates unchanged at a range of 5% to 5.25% after its meeting on June 14.
The U.S. market’s jump to fresh highs for the year triggered a positive start to the week in Asia, where sentiment was also supported by news that China’s services sector grew by more than expected in May.
A rise in oil prices after Saudi Arabia said it would trim its production by 1 million barrels a day seemed to be having little impact on broader market sentiment.
U.S. financials may be in focus later after The Wall Street Journal reported that big banks may face a 20% increase in capital requirements as regulators look to shore up the sector in the wake of regional-bank failures earlier in the year.
The Institute for Supply Management said its services index fell to a five-month low of 50.3% last month from 51.9% in April. A reading above 50% indicates activity is expanding, but the U.S. economy has slowed markedly from a year ago. Economists polled by The Wall Street Journal had expected the services index to rise to 51.8%.
Companies in focus
-
Apple
AAPL,
+1.94%
shares rose 1.8% to $184.26. The stock needs to finish above the $182.01 closing level it achieved on Jan. 3, 2022, to record a new all-time closing high. -
Shares of Palo Alto Networks Inc.
PANW,
+5.33%
jumped 4.2% after S&P Dow Jones promoted the $66 billion cybersecurity company to the S&P 500 index in a series of quarterly index adjustments to account for market cap. -
Planet Fitness Inc.
PLNT,
+1.81%
shares rose 2.1%, while shares of Doximity Inc.
DOCS,
+6.93%
gained 3.6% after S&P moved the stocks to its S&P MidCap 400 index
MID,
-0.70% .
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