Lingering Interest Rate Uncertainty May Weigh on Wall Street
08 Maio 2024 - 10:06AM
IH Market News
The major U.S. index futures are currently pointing to a lower
open on Wednesday, with stocks likely to move to the downside after
ending yesterday’s lackluster session narrowly mixed.
Lingering uncertainty about the outlook for interest rates may
weigh on the markets following Tuesday’s remarks by Minneapolis
Federal Reserve President Neel Kashkari.
Kashkari suggested interest rates may need to remain at current
levels for an “extended period” and said he couldn’t rule out
another rate increase.
The Federal Reserve is still widely expected to lower rates
sometime in the third quarter, although traders may take the
opportunity to cash in on some of the recent strength in the
markets.
While the major averages ended yesterday’s trading narrowly
mixed, they all remain at their best levels in about a month.
Nonetheless, overall trading activity may remain subdued amid
another relatively quiet day on the U.S. economic front.
A report on weekly jobless claims may attract attention on
Thursday, while the University of Michigan is due to release its
preliminary reading on consumer sentiment in May on Friday.
Stocks saw modest strength throughout much of the trading
session on Tuesday but gave back ground in afternoon trading to end
the day little changed. The Dow still managed to close higher for
the fifth consecutive session, reaching its best closing level in a
month.
The major averages ended the day narrowly mixed. While the
Nasdaq edged down 16.69 points or 0.1 percent to 16,332.56, the Dow
crept up 31.99 points or 0.1 percent to 38,884.26 and the S&P
500 inched up 6.96 points or 0.1 percent to 5,187.70.
The modest strength seen for most of the stock came as stocks
continued to benefit from renewed optimism about the outlook for
interest rates.
Relatively dovish comments from Federal Reserve Chair Jerome
Powell combined with weaker-than-expected job growth in April have
largely eliminated short-lived concerns the Fed might actually
consider raising rates.
Investors have instead grown increasingly confident about a rate
cut in the coming months, with the chances rates will be lower by
September now at 82.6 percent, according to CME Group’s FedWatch
Tool.
However, buying interest waned in afternoon trading after
Kashkari suggested interest rates may need to remain at current
levels for an “extended period.”
“I would need to see multiple positive inflation readings
suggesting that the disinflation process is on track” before
cutting rates, Kashkari said before the Milken Institute 2024
Global Conference.
Kashkari also said he could not rule out the Fed once again
raising rates, calling the bar for hiking rates “quite high” but
“not infinite.”
Among individual stocks, shares of Disney (NYSE:DIS) fell
sharply even though the entertainment giant reported better than
expected fiscal third quarter earnings.
Most of the major sectors ended the day showing only modest
moves, contributing to the lackluster close by the broader
markets.
Airline stocks showed a substantial move to the downside,
however, with the NYSE Arca Airline Index tumbling by 2.7
percent.
Considerable weakness also emerged among computer hardware
stocks, as reflected by the 1.1 percent loss posted by the NYSE
Arca Computer Hardware Index. On the other hand, utilities stocks
turned in a strong performance on the day, driving the Dow Jones
Utility Average up by 1.3 percent.
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