[New York Stock Market] Declines Ahead of US Inflation Data... Could It Be the Worst First Half in 50 Years?

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange started the week lower on the 27th (local time) as investors awaited the release of the Federal Reserve's (Fed) preferred inflation indicator. Analysts suggest that Wall Street is preparing to close the worst first half in nearly 50 years.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,438.26, down 62.42 points (0.20%) from the previous session. The S&P 500, focused on large-cap stocks, fell 11.63 points (0.30%) to 3,900.11, while the tech-heavy Nasdaq dropped 83.07 points (0.72%) to close at 11,524.55.

By sector, rising Treasury yields confirmed the decline in tech stocks. Microsoft (-1.05%), Nvidia (-1.50%), Tesla (-0.32%), Amazon (-2.78%), and Meta (-0.39%) all closed lower.

Nike, which is set to release earnings after the market close, fell 2.13%. Electronic Arts slid 3.53%, and Best Buy dropped 3.41%. Etsy declined more than 3% following a downgrade. Spirit Airlines’ stock fluctuated after news that it would accept an acquisition offer from Frontier Group, ultimately closing down 7.95%.

Conversely, energy stocks showed strength supported by rising oil prices. Valero Energy surged 8%, and Devon Energy rose 7.48%. Biotechnology firm BioNTech jumped over 7% after announcing that its COVID-19 booster generates improved immune responses against the Omicron variant.

Investors closely monitored economic data released that day. While there is hope that the Fed might slow the pace of rate hikes if recession signals are confirmed, durable goods orders and other indicators exceeded market expectations, leading the New York stock market to open lower.

According to the U.S. Department of Commerce, May durable goods orders increased 0.7% month-over-month to $267.2 billion. The Pending Home Sales Index for May, released by the National Association of Realtors (NAR), also rose 0.7% from the previous month. The market had initially expected a decline of around 4%, but the index rebounded for the first time in seven months. Florian Aielpo, Head of Macro at Lombard Odier Investment Managers, commented, "Good macroeconomic news is interpreted negatively by the market," adding, "Strong growth and strong inflation lead to rate hikes by the Fed and the European Central Bank (ECB)."

Ultimately, market attention is focused on inflation data. Market experts believe that a rebound in stocks will only be possible once there is confirmation that inflation has peaked. Ross Mayfield of Baird described the market movement that day as "lukewarm," noting, "A meaningful easing of inflation is needed to act as a positive catalyst for stocks." On the 30th, the Fed’s preferred inflation gauge, the May Core Personal Consumption Expenditures (PCE) Price Index, will be released. The current market consensus expects a 4.7% year-over-year increase.

Christopher Swan, strategist at UBS, pointed out, "Concerns that drove the market into a bear market in early June?such as the pace of rate hikes, recession threats, and political risks?have not disappeared." This week, earnings reports are expected not only from Nike but also from Bed Bath & Beyond, General Mills, Constellation Brands, and Walgreens.

On the same day in the New York bond market, the yield on the U.S. 10-year Treasury note rose to 3.207%.

International oil prices closed higher amid reports that the Group of Seven (G7) is discussing the introduction of a price cap on Russian crude oil. On the New York Mercantile Exchange, August West Texas Intermediate (WTI) crude oil futures closed at $109.57 per barrel, up $1.95 (1.81%) from the previous session.

Safe-haven gold prices declined. On the New York Commodity Exchange, August gold futures closed at $1,824.80 per ounce, down $5.50 (0.3%).