US tech stocks remained in focus on Monday as more data pointing to a cooling economy prompted investors to seek refuge in the sector.
The tech-heavy Nasdaq Composite was up 0.4%, extending its gains over the previous week, while Wall Street’s benchmark S&P 500 continued to lag, remaining flat in late morning trading.
The day’s moves are part of a broader trend of growth stocks overcoming those of value since the beginning of the year. The business models of growth stocks are less cyclical than value stocks and therefore more attractive to investors in times of economic downturn.
Meanwhile, new economic data on Monday added to signs that the Federal Reserve’s aggressive interest rate policy has started to take effect. The New York Fed said on Monday that its index measuring manufacturing activity in New York state plunged from 10.8 to minus 31.8 in May, far below analysts’ forecasts of minus 3.8. .
May’s monthly decline echoed a similarly steep drop in the index during the same month last year, however suggesting there was a seasonal adjustment issue or “other difficulty” with April’s data, Joshua said. Shapiro, US economist at consulting firm MFR.
Traders also awaited Tuesday’s release of US retail sales data for April, which could offer insight into consumer sentiment as inflation cools and high borrowing costs take hold.
Analysts expect the Census Bureau to report a 0.7% increase in overall retail sales from the previous month, following two months of declines.
Still, many investors looked ahead to a breakthrough between the White House and Congressional Republicans on talks to avoid an unprecedented national default.
“The equity market is stalled until we achieve a debt ceiling resolution and until we see more clarity from the regional banking sector, which two factors are weighing on equities right now,” said Brad Bernstein, managing director delegate of UBS Wealth Management in the US.
Yields on interest rate sensitive two-year Treasury bills remained unchanged at 4%, while 10-year bonds rose 0.041 percentage point to 3.5%. Bond yields rise when prices fall.
The dollar fell 0.2% against a basket of six other currencies, despite last week’s data showing that US consumers’ expectations for long-term inflation had reached a 12-year high.
In Europe, the regional Stoxx 600 was up 0.2%, while France’s CAC 40 and Germany’s Dax both ended the day flat, having stabilized after trading lower for much of the session.
Eurostat, the EU’s statistics agency, reported that euro zone industrial production fell by 1.4% year on year in March, after rising by 2% the previous month.
The reading was well below the 0.9% increase forecast in a Reuters poll of economists, suggesting the European Central Bank’s tightening campaign was cooling the region’s economy faster than expected.
In particular, the decline in capital goods production “certainly suggests that further tightening of credit standards may have hit activity at the end of the first quarter,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.
“It’s still not enough for the ECB to be convinced its job is done,” said Mohit Kumar, Jefferies chief European economist. “They still need to raise more to fight inflation, but economic data indicates they’re not far from done.”
Shares of Swedish real estate company SBB jumped 10.6% after the group said on Friday it raised $276 million through the sale of construction company JM. SBB’s value tumbled last week after S&P Global downgraded the company to junk status amid concerns about its exposure to rising interest rates.
Meanwhile, Germany said its wholesale price index recorded its first year-on-year decline since December 2020.
Asian stocks were up, with China’s CSI 300 index up 1.6% and Hong Kong’s Hang Seng index up 1.8%. China’s renminbi fell on Monday to its weakest level against the dollar in two months.
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