On the 23rd (local time), the three major indices of the New York Stock Exchange are showing a downward trend in the early market after President Joe Biden and House Speaker Kevin McCarthy’s debt ceiling-related meeting ended without results again.
As of 10:15 am on the same day, the Dow Jones 30 Industrial Average on the New York Stock Exchange (NYSE) is moving at the 33,224 line, down 33.57 points (0.10%) from the battlefield. The S&P 500 index, centered on large-cap stocks, is at 4176, down 16.23 points (0.39%), and the Nasdaq index, centered on technology stocks, is recording 12,685, down 35.30 points (0.28%).
Currently, the remaining seven sectors of the S&P 500 index, excluding energy, utilities, real estate, and consumer discretionary stocks, are all declining. Energy stocks are on the rise thanks to the rise in international oil prices. Chevron rose more than 2% from the battlefield as HSBC raised its investment recommendation. APA, Exxon Mobil, and Marasun Oil are also rising more than 1% each.
On the news that Apple signed a contract with Broadchip for 5G radio frequency parts worth tens of dollars, Broadcom rose by 1.3%, while Apple showed a weak trend. Yelp jumped more than 9% after activist investor TCS Capital Management sent an open letter to its board urging it to explore strategic alternatives, including a sale. After announcing the sale of its $2.6 billion real estate loan portfolio the day before, PacWest Bancorp is still up more than 6% on the day.
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Investors are keeping an eye on the political world’s discussion of raising the debt ceiling and the direction of the Federal Reserve’s monetary policy amid warnings that they may face default on June 1 at the earliest. President Biden and House Speaker McCarthy met again the afternoon before, but failed to find an agreement. While the Republican Party, which occupies the majority of the House of Representatives, opposes an increase in the debt ceiling, putting forward massive government spending cuts as a prerequisite, President Biden is in the position that tax reform through tax increases for the rich should be considered.
However, House Speaker McCarthy emphasized that he would continue efforts to prevent default, saying, “The president and I are aware of the deadline, so we will discuss it every day.” CNBC, an economic media outlet, reported the atmosphere as “the hour-long conversation ended without a resolution, but a more positive atmosphere.”
In the current market, the worst-case scenario, default, will not materialize, but they are concerned about the uncertainty that will lead to the very edge and its aftermath. “We are sending a very negative signal about our ability to run the economy,” Allianz economic adviser Mohamed El-Erian told CNBC’s Squawk Box. Philip Colmar, global strategist at MRB Partners, said, “The debt ceiling issue is weighing on investor sentiment.
With the Federal Open Market Committee (FOMC) meeting in June, opinions on whether to freeze or increase monetary policy are also mixed. Earlier, the representative hawk, James Bullard, President of the Federal Reserve Bank of St. Louis (Fed), emphasized the need for two additional rate hikes within the year, and as Fed officials continued to support austerity, the market also seems to lower expectations for a rate cut. CNBC reported in recent weeks that the Fed funds rate futures market has been betting on up to three cuts this year, but now believes that at most one cut is possible.
However, freezing observations dominate the June FOMC. According to FedWatch from the Chicago Mercantile Exchange (CME), as of this morning, the Fed funds rate futures market is reflecting a 70% chance that the Fed will keep rates unchanged in June. A series of hawkish remarks by Fed officials have lowered it slightly, but it is still at a high level. The prospect of an additional baby step (a 0.25 percentage point increase in the base rate) is in the 29% range.
This week, in addition to the minutes of the FOMC meeting in May, economic indicators such as the PCE price index for April, the inflation indicator that the Fed is monitoring, and the revised economic growth rate for the first quarter will be released one after another. Investors are expected to seek hints surrounding the possibility of further rate hikes and interest rate cuts within the year through the FOMC meeting minutes to be announced on the 24th. Core PCE for April, scheduled for the 26th, is expected to rise 4.5% year-on-year and 0.3% month-on-month. It is a matter of interest whether the remarks focused on further tightening will continue in the speeches of Fed officials scheduled during the week, such as Dallas Fed President Rory Logan and Boston Fed President Susan Collins.
Economic indicators released on the day were mixed. S&P Global’s purchasing managers’ index (PMI) for the U.S. service sector in May was tentatively counted at 55.1. This is the highest in 13 months. On the other hand, manufacturing in May The PMI was 48.5, below the baseline of 50. The non-manufacturing index released by the Philadelphia Fed was negative for three months in a row at -16. New home sales rose 4.1 percent to 683,000 in April, beating the Dow Jones estimate of 668,000.
In the New York bond market, Treasury yields rose amid concerns over debt ceiling negotiations and uncertainties over Fed monetary policy. The 10-year US Treasury yield rose to 3.73%, and the 2-year US Treasury yield, sensitive to monetary policy, rose to 4.38%. At one point during the intraday, the two-year yield exceeded 4.4%, the highest since last March. The Dollar Index (Dollar Index), which shows the value of the dollar against the currencies of six major countries, shows a slight increase of 103.3 from the battlefield.
International oil prices are rising. The price of West Texas Intermediate (WTI) for July is moving at $73.34 per barrel, up 1.75% from the battlefield.
European stock markets are all down. The German DAX index fell 0.33% and the UK FTSE index fell 0.07%. The French CAC index is down 1.15%.
New York = Correspondent Seul Kina Cho [email protected]
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