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Global stock market sentiment mostly deteriorated last week with a few exceptions. On Wall Street, the high-tech Nasdaq Composite crushed its rivals, up 2.51% while the blue-dancing Dow Jones fell -1%. Across the Atlantic, the DAX 40 and FTSE 100 indices are down -1.79% and -1.67%, respectively. Meanwhile, the Hang Seng fell nearly 5%.
The vast majority of gains in the past week have been driven by technology, which was magnified by a blowout earnings report from Nvidia Corp. The company emphasized AI-powered demand and expected earnings that were well above expectations, causing the stock to rise more than 25% and creating a ripple effect on the technology sector. Marvell Technology shares followed a similar path after suggesting that 2024 revenue will at least double demand from artificial intelligence. The stock is up 32%.
A closer look at the stock market shows that Uneven distribution of earnings. The seven largest companies in the S&P 500 are up an average of more than 40 percent since December. The S&P 500 has gained about 10% since then, with the remaining 493 companies up just 1%, on average. Meanwhile, economic data has continued to appear strong lately.
As a result, financial markets have been rapidly pricing in rate cuts from the Federal Reserve this year. In fact, the interest rate will be raised by 25 basis points for the month of July. The latest core deflator for PCE (the Fed’s preferred inflation measure) surprised higher last week amid a still tight labor market. The US dollar rose, and gold prices continued to weaken.
Ahead, all eyes are on two high-profile event risks. The first is the ongoing talks about the US debt ceiling. The US Treasury confirmed that the debt reduction measures will end by June 5th. Optimism about a deal contributed to gains in market sentiment, but for the time being, it appears that markets are not fully respecting the monetary policy implications of the deal and the strong economic data. This is to prepare for the ups and downs on the road.
Other notable data next week include China Manufacturing PMI (global growth story), Canadian GDP data for USD/CAD, and Eurozone inflation for EUR/USD. What else is in store for the markets next week?
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How did the markets perform – week of 5/22
Forecasting:
Next week for the British Pound: UK prices and US data will lead the GBP/USD
The UK Government Bond (Gold Bond) market is going through post-inflationary data at a difficult time with yields rising as markets price in a fresh round of BoE rate hikes.
Australian Dollar Forecast: The US dollar is dominating the action
The UK Government Bond (Gold Bond) market is going through post-inflationary data at a difficult time with yields rising as markets price in a fresh round of BoE rate hikes.
EUR Weekly Outlook: EUR/USD recovery hinges on debt ceiling deal
Big week ahead in terms of event risk as the EUR looks to recover. A potential debt ceiling deal could dampen inflation in the eurozone. Is it time for a bounce in EUR/USD?
Gold prices are at risk of a deeper correction due to higher real yields, and a stronger US dollar
Gold prices could continue to fall in the near term if real yields and the US dollar extend their rebound on the back of an hawkish repricing of Fed policy expectations.
USD Weekly Outlook: Will Debt Ceiling Deal and US DXY Jobs Report Boost Further?
The US dollar has risen 3 percent over the past three weeks, supported by economic data that has been pouring cold water on the Fed’s interest rate cut bets. Ahead, all eyes are on the US Non-Farm Payrolls.
S&P 500, Nasdaq week ahead: Momentum picks up on debt deal optimism
It seems that US stock indices are ready to extend gains in the coming week on the back of rising hopes for a deal to raise the US debt ceiling. What are the key levels to watch in the S&P 500 and Nasdaq 100?
– Text of the article by Daniel Dubrovsky, Chief Strategist at DailyFX.com
— Individual articles written by members of the DailyFX team
To connect with Daniel, follow him on Twitter:@tweet
