Interest rate hopes without stimulus: banking sector weighs on the Dow

Interest rate hopes without stimulus
Banking sector weighs on the Dow

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Despite recent records, Wall Street appears disoriented on Whit Monday. Investors are eagerly awaiting the Fed minutes on Wednesday for clues about interest rates. A decline in JP Morgan’s price drags the Dow down.

Wall Street ended the first trading day of the new week with a mixed trend. The Dow Jones Index had set a new record high of 40,077 points in early trading, but was unable to maintain this level and slipped significantly below the round mark again. The background was the sharp decline in JP Morgan shares. CEO Jamie Dimon had hinted that he might retire sooner than expected.

Overall, however, the indices moved along fairly narrow lines due to a lack of fresh impetus. The Dow Jones Index lost 0.5 percent to 39,807 points. The S&P 500 however, climbed by 0.1 percent and the Nasdaq Composite increased by 0.7 percent. The latter also marked a new record high.

The US stock markets had recently received a tailwind from increased hopes of interest rate cuts after the latest economic and economic data gave indications that the US Federal Reserve could perhaps lower its interest rates sooner than expected. The majority of the market is currently expecting an interest rate cut in September.

However, market hopes have also been dampened. Statements from the ranks of the US Federal Reserve had signaled that interest rates could remain at a high level for longer in order to further contain inflation. Investors are hoping that the minutes of the US Federal Reserve’s most recent interest rate meeting, which will be published on Wednesday, will provide further insight into the Fed’s interest rate course. There was no economic data on the agenda at the beginning of the week. The reporting season in the USA is also drawing to a close. First quarter figures from Nvidia (+2.5%) are expected in the middle of the week.

JP Morgan biggest loser in the Dow

JP Morgan
JP Morgan 183.00

The individual values ​​decreased JP Morgan by 4.5 percent. CEO Dimon hinted at investor day that he may retire sooner than expected. Dimon also noted that the company will not engage in major share repurchases at current stock prices. However, the increase in the outlook for net interest income in the current financial year did not provide any positive impetus.

Meanwhile, the Federal Reserve and two other federal regulators appear to be planning to significantly reduce the nearly 20 percent required capital increases for the largest U.S. banks, people familiar with the matter said. The required capital increases for institutions – which are intended to ensure that major banks have sufficient buffers to absorb potential losses – would on average only be half as high as originally planned, it said. Goldman Sachs lost 1.0 percent, Citigroup fell by 1.4 percent. The Banking sector the S&P 500 lost 2.5 percent.

Dollar a little firmer – oil prices are falling

Crude oil WTI Crude oil WTI
Crude oil WTI 79.71

The dollar appeared moderately firmer. The dollar index rose 0.2 percent. The US dollar “continues to move sideways” due to a lack of relevant data, BBH analysts said. They added that the likelihood of a rate cut this summer remains high, although Fed officials have expressed caution about premature easing.

The Oil prices gave way after slight impacts. Prices for WTI and Brent fell by up to 0.4 percent. Developments in Iran, where President Ebrahim Raisi died in a helicopter crash, only moved the market for a short time. According to analysts at ING, oil prices have been trading in a range of less than $3.50 since the beginning of May. More clarity from the OPEC+ oil cartel on its production policy in the second half of the year may be needed to provide impetus for the market to break out of the recent price range, analysts said.

The Gold price marked another record high at $2,454 per troy ounce. It was finally quoted at $2,428, an increase of 0.5 percent. Market participants pointed to the ongoing hopes of lowering interest rates. In addition, gold is still in demand as a supposed safe haven given the existing uncertainties in the Middle East following the death of the Iranian president.

For the Returns The US bond market rose slightly again, continuing Friday’s upward trend. Most recently, US Federal Reserve Chairman Jerome Powell spoke out against further interest rate hikes and said that more data is needed to begin cutting interest rates. Wednesday’s Fed minutes “will be key to seeing whether there was a fundamental disagreement with Powell’s tone,” BBH said.

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