An electric stock board at the Tokyo Stock Exchange, operated by Japan Exchange Group in Tokyo, Japan, on Thursday, 22 February 2024. (Photo: Soichiro Koriyama/Bloomberg) Equities had a hard time finding direction after the S&P 500 approached 5,500, spurring calls for a technically overbought market. A drop in most tech megacaps weighed on trading. Treasuries edged up. Swaps continued to price in less than two Fed rate cuts this year.
US industrial production increased in May, helped by a broad-based pickup in factory output. Separate figures showed retail sales barely rose and prior months were revised lower, suggesting greater financial strain among consumers.
“Stock prices are going up without the help of rate cuts because corporate profits and the economy continue to expand,” said Chris Zaccarelli at Independent Advisor Alliance. “Without the consumer, this bull market is going to stall out, so investors need to see more consumer spending and not a material slowdown.”
Fed Bank of New York president John Williams told Fox Business the US economy is “moving in the right direction,” but declined to say when he would favor a rate decrease. He’s among the several officials on schedule to talk on Tuesday.
The S&P 500 hovered near 5,480. Treasury 10-year yields declined four basis points to 4.24%. Traders geared up for a $13-billion US sale of 20-year bonds. Around 10 borrowers are considering new bond sales in the high-grade primary market ahead of Wednesday’s US holiday.
So far, the economy could pull off a soft landing, especially if the Fed is quick to adjust policy as conditions change,” said Jeffrey Roach at LPL Financial.
Global investors are likely to keep pumping money into record-hitting stock markets, according to a survey by Bank of America Corp.
Answering a question about the asset class that would benefit most from a reallocation of money-market funds, 32% of respondents opted for US stocks. Another 19% said the cash would go into global equities, while a quarter of the respondents indicated they would buy government bonds.
There’s not much doubt in the market right now to curb the enthusiasm about the US stock rally driven by a small group of tech stocks. But some investors are increasingly looking for the ways to hedge the concentration risk. The “Magnificent Seven” mega caps have contributed more than 60% to the S&P 500’s return this year.
The benchmark has reached an overbought territory, but stock market breadth remains very narrow with only 46% of stocks trading above their 50-day moving averages. The relative strength index, or RSI, spread between market cap and equal-weighted S&P 500 is at its widest since at least 1990.