AI euphoria suffers a setback
US stock markets await the presidential debate
27.06.2024, 22:53
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Trading on the US stock markets is characterized by caution. Investors are looking ahead to the upcoming first presidential debate and the important PCE index, whose data will be released on Friday.
The US stock markets closed this evening with slight gains. Dow Jones Index closed 0.1 percent higher at 39,164 points. The S&P 500 also rose by 0.1 percent, while the Nasdaq Composite by 0.3 percent. There were a total of 1,665 (Wednesday: 1,233) price winners and 1,157 (1,526) losers. 66 (119) stocks closed unchanged.
Trading was characterised by caution. One of the reasons for this was the US presidential election campaign. After the stock market closes in the USA, the two most promising candidates, the incumbent US President Joe Biden and his challenger and predecessor in office, Donald Trump, will meet for the first televised debate of the current election campaign. Investors also waited for the PCE Index on personal consumption expenditures, which will not be released until Friday. It is considered the US Federal Reserve’s preferred price measure and could significantly influence market expectations regarding possible interest rate cuts later in the year.
According to Raphael Bostic, President of the Atlanta Fed, the first rate cut by the US Federal Reserve would be the start of a series of interest rate cuts. “I think my hesitation (to cut interest rates) and my desire to be patient is explained by the fact that we have to be absolutely certain that we will reach the 2 percent target again,” said Bostic. He does not have that confidence at the moment. Bostic continues to believe that inflation and economic activity will cool down enough that the central bank could cut interest rates towards the end of the year.
The recently published economic data contained both positive and negative aspects, but overall did not indicate that the US economy was running hotter than expected. For example, orders for durable goods rose by 0.1 percent on a monthly basis in May, while economists had forecast a decline of one percent. The number of initial applications for unemployment benefits fell slightly more than expected last week. The third reading of the gross domestic product (GDP) for the first quarter showed growth of 1.4 percent, which was in line with the consensus estimate; growth of 1.3 percent had been reported previously.
Micron with strong minus – Walgreens give in
Meanwhile, the AI euphoria has been dampened again: The chip manufacturer Micron When presenting its quarterly figures, Micron gave an outlook that fell short of the market’s high expectations. The fact that Micron increased its sales surprisingly strongly in the third quarter and also earned more than expected fizzled out. The share price fell by 7.1 percent.
Walgreens Boots Alliance fell 22.2 percent after the pharmacy chain cut its profit forecast for the fiscal year, citing a “worse-than-expected U.S. consumer environment.” In an interview with the Wall Street Journal, CEO Tim Wentworth also said the company plans to close a large portion of its approximately 8,600 stores in the U.S. and reduce its stake in primary care provider VillageMD.
The share of Levi Strauss dropped by 15.4 percent. The jeans manufacturer increased sales in its second fiscal quarter, but not as significantly as expected. In addition, the annual sales forecast was only confirmed.
Blackberry gained 10.9 percent. The cybersecurity company did not slip as deeply into the red in the first quarter as analysts had expected.
International Paper lost 7.2 percent after the Brazilian company Suzano broke off negotiations to take over the paper manufacturer. Suzano had originally offered 15 billion US dollars for International Paper. The US company, in turn, announced earlier this week that its takeover of the British packaging manufacturer DS Smith for over seven billion US dollars in the USA had cleared an important regulatory hurdle.
US dollar weakens slightly – bond yields fall
The foreign exchange market showed U.S. dollar slightly lighter after the previous day’s gains. The dollar index fell by 0.1 percent. Deutsche Bank expects a stronger US dollar over the course of the year on the premise that the Federal Reserve cuts interest rates more slowly than other central banks, according to George Saravelos, Global Head of FX Research. The US dollar is also underestimating the risks associated with the US elections, which could give the safe-haven currency a boost. “The rise in the dollar in recent days is probably due in part to the fact that the market is finally starting to price in a higher risk premium for this event,” said Saravelos.
At the Bond market Yields fell after the economic data, although they had risen more sharply on Wednesday. The yield on 10-year bonds fell by 4.1 basis points to 4.29 percent.
The Gold price rose again after the significant losses the day before, supported by the weaker US dollar and falling market interest rates. The price per troy ounce increased by 1.2 percent.
Also the Oil prices The prices for WTI and Brent rose by up to 1.4 percent. This was supported by hopes of higher demand during the current holiday season, after the unexpected increase in US oil stocks had weighed on prices the day before.
You can find out more about today’s stock market events here.