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Traders are awaiting the release of personal consumption expenditures price index data on Friday.
“Today’s economic data is a double-edged sword,” said Chris Zaccarelli of the Independent Investors Alliance.
The S&P 500 index fell to about 5,235 points. The Nasdaq 100 index fell by 1%. US officials have slowed the pace of issuing licenses to chipmakers such as Nvidia and Advanced Micro Devices for large-scale AI accelerator shipments to the Middle East, according to people familiar with the matter. Salesforce shares fell by 20% after weak expectations.
Two-year Treasury yields fell five basis points to 4.92%. The value of the dollar fell.
A glitch disrupts the S&P 500 index.
Traders faced real-time pricing issues for the S&P 500 and Dow Jones Industrial Average for more than an hour Thursday morning in New York. Individual stocks and ETFs continued to be priced normally throughout. This, along with futures trading, has helped traders overcome this turmoil.
“At the time of the announcement, I wasn’t worried,” said Mike Zygmunt of Harvest Volatility Management. “Futures were still trading normally, so we could use them to extrapolate the level of the S&P 500.” Most traders who They had enough knowledge, they didn’t care about it.”
Restrictive monetary policy
New York Federal Reserve Bank President John Williams said he expects inflation to continue to decline during the second half of this year, adding that high borrowing costs are constraining the economy.
Zaccarelli of the Independent Investors Alliance says he has long believed that the economy matters more than lowering interest rates in order to support stock prices.
“Of course, the two are related because, assuming all factors remain constant, he is more likely to avoid,” Zaccarelli explained American economy”A recession if interest rates were lower than they are now, but ultimately economic expansion – and continued corporate profits – is what is most important in the medium and long term.”
This year’s baseline scenario expects inflation to remain relatively steady and the Federal Reserve to keep interest rates unchanged for most, if not all, of 2024, but also for the economy to continue to expand and corporate profits to continue to grow.
Zaccarelli added: “Therefore, it is expected that the stock market will remain in a rising market, provided that it will witness an occasional decline along its path.”
Weaker economic growth
Bureau of Economic Analysis figures released Thursday showed that gross domestic product rose 1.3% year-on-year in the first three months of the year, below the previous estimate of 1.6%. The economy’s main growth driver – personal spending – increased by 2.0%, versus the previous estimate of 2.5%.
“Overall, we have an economy that has emerged from hypergrowth — which it needs to do — but remains on track for continued growth,” said Jim Baird, of Plante Moran Financial Advisors. “Inflation remains a major challenge for consumers.” And monetary policymakers, a challenge that still appears ripe for solution, especially as wage growth and housing inflation return to normal.”
Timing of interest cuts
Baird added that the problem relates to timing for monetary policy makers, who need to see evidence that inflation indicators are resuming their decline towards 2% and dissipate the risks of new challenges that would harm the inflation process.
“It’s been a round of favorable data for bonds,” said Ian Lingen of BMO Capital Markets. “We’re looking at interest rates falling throughout the day as investors unwind their positions ahead of the core personal consumption expenditures data on Friday.” And the end of the month.”
The Fed’s most closely watched core inflation indicator is about to show some modest slowing of stubborn price pressures, bolstering central bankers’ wisdom about the timing of interest rate cuts.
Chris Larkin, from Morgan Stanley’s E*Trade, said: “Inflation and interest rates are still dominating the scene… We are awaiting the personal consumption expenditures price index data tomorrow, because it may dominate market sentiment until… Jobs report next Friday.
Positive environment for stocks
Signs that the pace of economic growth has slowed enough to pave the way for interest rate cuts coincide with strong corporate earnings, which is seen as good for stocks.
Analysis conducted by Bank of America Corp strategists, examining data dating back to 1950, indicates that previous quarters that witnessed declining economic growth and rising corporate profits saw the S&P 500 index rise by 3.6%. in the middle.
This result is higher than the average gain of 2% in periods when corporate profits and US GDP rose.
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