Nasdaq closes above 17,000; S&P 500 slightly higher, Dow down

NEW YORK – The Nasdaq crossed 17,000 for the first time ever on Tuesday, boosted by gains in Nvidia, while the S&P 500 closed barely higher and the Dow ended lower as Treasury yields rose.

Nvidia jumped 7% and boosted shares of other chip stocks as traders returned from a holiday-extended weekend. An index of semiconductors rose 1.9%.

S&P 500 technology led gains among sectors, while healthcare was the biggest decliner along with industrials.

Stocks lost ground in afternoon trading as US Treasury yields climbed to multi-week highs after weak debt auctions.

“We had two disappointing results and we saw yields climb and the (stock) market respond negatively,” said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina.

“The market doesn’t want to see yields edging up… to a level that perhaps threatens the economy and the consumer and thwarts the (Federal Reserve)’s time table for easing.”

Investors awaited US inflation data this week that could sway expectations for Fed rate cuts.

The US core Personal Consumption Expenditures Price Index report for April is due later this week. The Fed’s preferred inflation barometer is expected to hold steady on a monthly basis.

The Dow Jones Industrial Average fell 216.73 points, or 0.55%, to 38,852.86, the S&P 500 gained 1.32 points, or 0.02%, to 5,306.04 and the Nasdaq Composite gained 99.09 points, or 0.59%, to 17,019.88.

Wall Street has been hitting records recently as investors bet the US central bank could kick off interest-rate cuts this year.

Expectations for the timing of rate cuts have see-sawed, with policymakers wary as data still reflects sticky inflation.

Odds of a rate reduction of at least 25 basis points stand above the 50% mark only for the months of November and December this year, according to the CME FedWatch Tool. The odds of a September rate cut fell to around 46% from over 50% a week ago.

The retail sector will also be in focus this week, with several retailers like Dollar General, Advance Auto Parts and Best Buy due to report results.

US trading moves to a shorter settlement on Tuesday, which regulators hope will reduce risk and improve efficiency, but is expected to temporarily increase transaction failures for investors.

Apple shares rose after iPhone sales in China surged 52% in April from a year earlier, Reuters calculations based on industry data showed. But the stock pared gains late and closed only slightly higher at USD 189.99.

GameStop shares shot up about 25.2% and closed at USD 23.78. Late on Friday, the videogame retailer said it had raised USD 933 million by selling 45 million shares as part of an “at-the-market” offering.

Hess shareholders approved the USD 53 billion merger with Chevron. Hess shares closed up 0.4%, while Chevron shares closed up 0.8% and Exxon Mobil shares closed up 1.3%.

On the Nasdaq, declining issues outnumbered advancers by a 1.34-to-1 ratio and by a 1.75-to-1 ratio on the NYSE.

The S&P 500 posted 24 new 52-week highs and 11 new lows while the Nasdaq Composite recorded 93 new highs and 107 new lows.

Volume on US exchanges was 11.91 billion shares, compared with the 12.32 billion average for the full session over the last 20 trading days.

(Reporting by Abigail Summerville in New York; additional reporting by Caroline Valetkevitch in New York and Johann M Cherian, Lisa Pauline Mattackal and Shubham Batra in Bengaluru; Editing by Pooja Desai and David Gregorio)

Dollar bulls eye a 157-plus close vs yen, US data to test BoJ threat

Dip buyers supported USD/JPY after its latest retreat on Tuesday as Treasury yields rebounded, but a close above 157 and new May highs in Treasury-JGB yield spreads look key for buyers risking a repeat of suspected BoJ interventions near May 1 and April 29’s 157.99/60.245 peak.

US core PCE on Friday is eyed next, but monthly and yearly rates are seen unchanged from April’s 0.3% and 2.8% readings. That may mean next week’s ISMs, JOLTs, and jobs reports are key to USD/JPY clearing 158 and 160, regardless of intervention risk.

IMM specs ramped up their net long USD/JPY positions in the week to last Tuesday amid the big dip to 153.60 on May 16, and are looking for a close above the 61.8% Fibo of the 160.245-151.86 intervention-led slide at 157.04 to target May’s 157.99 high by the 76.4% Fibo at 158.27.

May’s recovery has been slowed by 2-year Treasury-JGB yield spreads only recovering about half of their April-May fall. But even without higher spreads or new USD/JPY highs, existing spreads make USD/JPY longs profitable.

The sharp drop in expected Fed rate cuts this year to just 34bp and the 26bp of BoJ hikes being priced in imply a roughly 5% Fed funds rate and 0.34% BoJ bank rate by year-end, leaving plenty of carry.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Dollar rebounds as yields rise, consumer confidence improves

The dollar gained on Tuesday, giving back earlier losses, as benchmark US Treasury yields hit a four-week high following some weak auctions.

The Treasury Department saw soft demand for sales of two-year and five-year notes. They came after data showed that US consumer confidence unexpectedly improved in May after deteriorating for three straight months.

“The bond market has turned around today and the dollar with it,” said Adam Button, chief currency analyst at ForexLive in Toronto, citing the weak auctions and noting that the improving consumer confidence report reflects “stronger growth.”

US economic data was better than expected in the first quarter and so far there are no major signs of deterioration in areas such as the labor market, which some traders are waiting on before taking a more bearish view on the greenback.

Concerns that inflation will remain stubbornly above the Fed’s target for longer are also providing some support for the US currency. Tuesday’s data showed that worries about inflation persisted and many households expected higher interest rates over the next year.

Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday that the US central bank should wait for significant progress on inflation before cutting interest rates and added that the central bank could potentially even hike rates if inflation fails to come down further.

Consumer price inflation showing that prices increased less than expected in April briefly boosted hopes that the Fed is closer to cutting rates, but Fed officials have stressed that they want to see several more months of progress before easing policy.

“The Fed is in no rush to cut rates,” said Button. He added, “the American economy is uniquely strong. It’s tough to bet against the US dollar until the weakness is confirmed.”

This week’s main US economic focus will be personal consumption expenditures due on Friday, which is the Fed’s preferred inflation measure.

The dollar index was last up 0.03% at 104.59, after earlier dropping to 104.33. The euro gained 0.01% to USD 1.0859. Sterling weakened 0.05% to USD 1.276.

The European Central Bank’s Francois Villeroy de Galhau on Monday confirmed market expectations that, barring major surprises, a first rate cut next week is a done deal. But investors have recently updated their bets on future ECB moves, pricing in less than a cut in every quarter in 2024 and early 2025.

German inflation data due on Wednesday and the wider euro zone’s reading on Friday will be watched for clues on how soon easing from the central bank could come.

The greenback gained 0.18% against the Japanese yen to 157.15 yen.

The Bank of Japan’s three key measurements of underlying inflation all fell below 2% in April for the first time since August 2022, data showed on Tuesday, heightening uncertainty over the timing of its next interest rate hike.

The BOJ will proceed cautiously with inflation-targeting frameworks, Governor Kazuo Ueda said on Monday, noting that some challenges are “uniquely difficult” for Japan after years of ultra-easy monetary policy.

In cryptocurrencies, bitcoin fell 2.48% to USD 67,860.42.

(Reporting by Karen Brettell; Additional reporting by Stefano Rebaudo and Alden Bentley; Editing by Ana Nicoladi da Costa and Matthew Lewis)

Japanese consumers, Aussie CPI in focus

Japanese consumer confidence and Australian inflation are the main points of focus for markets in Asia on Wednesday, as investors ponder the broader implications of a widespread rise in bond yields.

US Treasury yields, the benchmark for global borrowing costs, rose to four-week highs on Tuesday in the wake of a weak US debt auction, leading to a mixed performance on Wall Street.

The Dow fell, the S&P 500 was flat and Nvidia’s extraordinary rally powered the Nasdaq to a fresh record high – shares in the AI poster child have soared 20% in the last three trading days and the firm is now worth USD 2.8 trillion.

But Asian markets on Wednesday may be more sensitive to the tightening of financial conditions from US yields than the US tech boom. Some analysts reckon the 10-year Treasury yield may now be entering a higher range of 4.50% to 4.70%, and the two-year yield is knocking on the door of 5.00% again.

Closer to home, Japanese Government Bond yields are also under renewed scrutiny. Yields are making new multi-year highs across the curve, prompting a flurry of comments from Japanese and global officials in recent days.

The 10-year JGB yield rose for an eighth straight day on Tuesday to hit a fresh 12-year high of 1.035%, and the 2-year JGB yield inched up to a new 15-year peak of 0.36%.

Bank of Japan Governor Kazuo Ueda on Saturday said the bank’s ‘basic stance’ is that long-term bond yields should be set by markets. But this is difficult for the BOJ, which has for years been hoovering up JGBs in its battle against deflation and now owns more than 50% of the entire market.

Higher bond yields raise the BOJ’s interest bill. A lot.

On the other hand, higher JGB yields could support the yen, which officials would probably welcome – Japan’s finance minister on Tuesday said he was more concerned about the downside of a weak exchange rate right now, namely the increased burden on companies and consumers from higher import prices.

Do JGB yields take a breather here? BOJ data on Tuesday sent out mixed signals on inflation – corporate services prices are rising at their fastest pace since 2015, but other data show key measurements of underlying inflation falling below the bank’s 2% target for the first time since August 2022.

If ‘higher for longer’ JGB yields boost the yen, Japan Inc. could feel the squeeze. The weak currency has attracted huge foreign investor flows into Japan, but with further ‘material’ weakness no longer likely, HSBC strategists are closing their overweight position in Japanese equities.

Here are key developments that could provide more direction to markets on Wednesday:

– Australia inflation (April)

– Japan consumer confidence (May)

– IMF’s Gita Gopinath briefs media following IMF’s annual assessment of the Chinese economy

(Reporting by Jamie McGeever; Editing by Josie Kao)

Gold rises on softer dollar as focus shifts to US inflation data

Gold prices gained on Tuesday, helped by a weaker dollar as investors look forward to US inflation data due later this week for more clarity on interest rate cut timings.

Spot gold was up 0.3% at USD 2,357.44 per ounce by 1:55 p.m. ET (1755 GMT). US gold futures settled 0.9% higher at USD 2,356.5.

“The dollar index is down and we are seeing the yield curve rates drop a little bit. Gold is coming off a correction and is hovering around resistance levels and now it’s bouncing again,” said Bart Melek, head of commodity strategies at TD Securities.

“We continue to be fairly optimistic on gold. I still think that ambiguity of Federal Reserve monetary policy may very well keep gold from taking off and moves be very much data dependent going forward.”

The dollar slipped to a more than one-week low, making gold less expensive for other currency holders.

Focus this week will be on the US core personal consumption expenditures price index (PCE), the Fed’s preferred inflation gauge, due on Friday.

Fed meeting minutes released last week showed that the policy response, for now, would involve maintaining the benchmark rate at its current level.

Traders are pricing in about a 63% chance of a Fed rate cut by November. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

“Gold prices are likely to remain fairly supported by buying-on-dips demand and central bank diversification,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.

Demand from global central banks for gold has been elevated for two years as they diversify their foreign currency reserves.

Meanwhile, global physically backed gold exchange-traded funds (ETFs) saw net outflows of 11.3 metric tons last week, according to the World Gold Council.

Silver gained 0.9% to USD 31.95 after a 4.4% jump on Monday. Platinum climbed 0.3% to USD 1,057.10. Palladium eased 1.1% to USD 978.00.

(Reporting by Brijesh Patel in Bengaluru, additional reporting by Polina Devit in London; Editing by Ravi Prakash Kumar and Alan Barona)

Oil up on OPEC+ meeting, summer driving season and weaker US dollar

NEW YORK – Oil prices gained more than USD 1 a barrel on Tuesday on the expectation that OPEC+ will maintain crude supply curbs at its June 2 meeting, while the start of US summer driving season and a weaker dollar also boosted the commodity.

Brent crude futures for July delivery settled up USD 1.12, or 1.4% at USD 84.22 a barrel. US crude ended at USD 79.83 a barrel, gaining USD 2.11, or 2.7% from Friday’s close, having traded through Monday’s US mark Memorial Day holiday without a settlement.

For the online meeting of OPEC+ oil producers coming up on Sunday, traders and analysts are predicting 2.2 million barrels per day of voluntary production cuts to stay in place.

“We expect OPEC+ to extend the current cut for at least another three months at its upcoming meeting,” UBS analysts said in a note.

“This week’s upside follow-through is being facilitated by a significant weakening in the dollar and a growing consensus that OPEC+ will extend production cuts at the upcoming weekend meeting,” said Jim Ritterbusch of Ritterbusch and Associates.

The dollar slipped 0.1% to a more than one-week low.

Oil extended a more than 1% rise in trade on Monday that was muted due to the holiday, with hopes of a demand boost from the first tradable day since the start of the US summer driving and vacation season providing support.

Worries over US interest rates remaining elevated for a longer period contributed to a weekly loss for crude last week. Higher rates boost the cost of borrowing, which can dampen economic activity and demand for oil.

Investors will watch the US core personal consumption expenditures price index (PCE), which is a main inflation gauge for the Federal Reserve, due on Friday.

“Despite the indisputably brighter mood seen in the last two days, interest rate concerns will most plausibly act as a (brake) on further attempts to send oil prices meaningfully higher in the immediate future,” said Tamas Varga of broker PVM.

Air travel data also helped to buoy oil prices, with US seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly above 90 million, data from flight analytics company OAG showed, surpassing 2019 levels.

The continuing conflict in the Middle East, which on Monday included the death of an Egyptian security service member in an exchange of gunfire with Israeli forces, also helped boost oil prices, said Bob Yawger of Mizuho bank.

(Reporting by Laila Kearney; Additional reporting by Alex Lawler in London, Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Marguerita Choy and Nick Macfie)

Gold gains 1% as traders brace for key US inflation data

Gold prices jumped 1% on Monday after a two-week low hit in the previous session as investors assessed diminishing bets of U.S. interest rate cuts ahead of a key inflation report due later in the week.

Spot gold was up about 1% to USD 2,355.60 per ounce as of 10:05 a.m. ET (1405 GMT), having touched its lowest since May 9 at USD 2,325.19 on Friday.

Most of the markets in the US are closed for the Memorial Day federal holiday.

Bullion hit a record high of USD 2,449.89 last week, but has shed more than $100 since then.

“Gold has suffered from more hawkish perceived comments from Fed officials and better-than-expected U.S. economic data, with market participants again shifting back the timing of the first Fed rate cut,” UBS analyst Giovanni Staunovo said.

Federal Reserve officials indicated that it would likely take longer than previously anticipated for inflation to fall to 2%, the minutes of its latest policy meeting showed last week.

Fed Governor Christopher Waller said on Friday it’s possible that a key underlying interest rate that influences the potency of monetary policy may rise in the future after years of declines, but it’s too soon to say if that will happen.

While gold is often considered a safeguard against inflation, higher rates increase the opportunity cost of holding the non-yielding asset.

Investors are now waiting for the April reading on the personal consumption expenditures (PCE) price index, the U.S. central bank’s preferred inflation gauge, which is due on Friday.

Traders are currently pricing in a roughly 62% chance that the Fed will cut rates in November, according to the CME FedWatch tool, compared to about a 63% chance on Friday.

“We expect gold prices to stay volatile, and price setbacks to be shallow, targeting gold prices to test new record highs later this year,” UBS’ Staunovo said.

Spot silver rose 3.6% to USD 31.42. It hit an 11-year high last week.

“Silver has outperformed gold this year, and this trend is likely to continue,” Staunovo said.

Platinum climbed 2.7% to USD 1,052.75, and palladium rose 2.9% to USD 991.11. Both metals were up 3% earlier in the session.

(Reporting by Daksh Grover in Bengaluru; Editing by Andrea Ricci)

Euro zone bond yields fall after ECB officials talk up cuts

Euro zone government bond yields fell on Monday after European Central Bank officials said they have room to cut interest rates as inflation slows, ahead of key economic data later this week.

“Barring a surprise, the first rate cut in June is a done deal, but afterwards we have several degrees of freedom,” French central bank chief Francois Villeroy de Galhau told Germany’s Boersen Zeitung.

ECB chief economist Philip Lane told an audience in Dublin that easing too late risked pushing inflation below target, although he also said cutting too fast could risk a flare-up of price pressures.

Germany’s 10-year bond yield, the bloc’s benchmark, dropped 5 basis points (bps) to 2.536%. The yield, which moves inversely to the price, had touched a one-month high of 2.618% on Friday after survey-based data showed the euro zone economy brightened in May.

Investors will focus on the German consumer price index on Wednesday, along with euro area inflation figures and the US personal consumption expenditure index on Friday. The ECB’s consumer expectations survey will be released on Tuesday, and the Federal Reserve’s Beige Book on Wednesday.

“Our economists broadly concur with the consensus that headline (euro area) inflation should tick up while the decline in core inflation is likely to stall,” Hauke Siemssen, rate strategist at Commerzbank, said.

“This outcome could add spice to the ECB’s assessment that headline and core inflation dynamics are both decelerating.”

Money markets last priced in 60 basis points (bps) of ECB monetary easing in 2024, which implies two rate cuts and an around 30% chance of a third move by year-end.

The ECB is ready to cut interest rates next month but policy must continue to be restrictive this year as wage growth will not normalise until 2026, ECB chief economist Philip Lane said in an interview with the Financial Times, also published on Monday.

Germany’s two-year government bond yield, more sensitive to policy rate expectations, was down 6 bps at 3.027% after hitting 3.124% on Friday, its highest since mid-November.

German business morale stagnated in May, falling short of a forecast improvement, according to a survey on Monday.

Italy’s 10-year yield was down 6 bps at 3.828%, while the gap between Italian and German yields was at 129 bps.

The spread between US 10-year Treasuries and German bunds – a gauge of the expected policy path divergence between the ECB and the Fed – widened 5 bps to 193 bps.

BofA economists expect the divergence between the ECB and the Fed monetary policy to be wider than the current market expectations and the spread between US and German yields to break recent peaks by year-end.

(Reporting by Stefano Rebaudo and Harry Robertson; Editing by Sriraj Kalluvila, Susan Fenton and Andrew Heavens)

Oil rises 1% ahead of inflation data after downbeat week

HOUSTON, May 27 – Oil prices rose over 1% in muted trade owing to public holidays in Britain and the United States after a downbeat week characterized by the outlook for US interest rates in the face of sticky inflation.

The Brent crude July contract settled USD 1, or 1.2% higher at USD 83.12 a barrel. The more active August contract rose USD 1.04 to USD 82.88.

US West Texas Intermediate (WTI) crude futures CLc1 were up 93 cents at USD 78.65.

Brent lost about 2% last week and WTI nearly 3% after Federal Reserve minutes showed some officials would be willing to raise interest rates further if it were deemed necessary to control stubbornly high inflation.

“Sentiment in the oil complex … has been skittish as investors are constantly recalibrating expectations for the Federal Reserve’s monetary policy trajectory,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Recent data emanating from Western economies has shifted rate cut expectations depending on geography.

On Monday, key European Central Bank (ECB) policymakers said the bank has room to cut interest rates as inflation slows but must take its time in easing policy.

Figures for inflation in the euro zone are due on Friday and economists believe an expected tick up to 2.5% should not stop the ECB from easing policy next week.

The US personal consumption expenditures index expected this week will be in the spotlight for further signals about interest rate policy. The index, due to be released on May 31, is viewed as the US Federal Reserve’s preferred measure of inflation.

German inflation data on Wednesday and euro zone readings on Friday will also be watched for signs of a European rate cut that traders have pencilled in for next week.

Eyes will also be trained on the coming meeting of the OPEC+ group of oil producers comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia. The meeting is to take place online on June 2.

An extension to output cuts of 2.2 million barrels per day is the likely outcome, OPEC+ sources have said this month.

Goldman Sachs raised its global oil demand forecast for 2030 on Monday and expects consumption to peak by 2034 on a potential slowdown in electric vehicle adoption, keeping refineries running at higher-than-average rates till the end of this decade.

(Reporting by Arathy Somasekhar in Houston, Natalie Grover in London, Colleen Howe in Beijing and Mohi Narayan in New Delhi. Editing by David Goodman, Sharon Singleton, Rod Nickel and Diane Craft)

Dollar down on profit-taking but upbeat outlook remains

NEW YORK – The dollar slipped against most major currencies on Friday as traders booked profits after recent gains but the US currency remained well-placed for further advances, supported by strong US economic data that has prompted markets to dial back expectations for interest rate cuts.

Data on Friday showed new orders for key US-manufactured capital goods rebounded more than expected in April and shipments of these goods also increased, suggesting a pickup in business spending on equipment early in the second quarter.

This follows Thursday’s data that showed US business activity in May accelerated to the highest level in just over two years and manufacturers reported surging input prices.

Minutes from the Federal Reserve’s last meeting published this week showed a lively debate among policymakers as to whether current rates were sufficiently restrictive to cool inflation.

The dollar was down 0.3% at 104.72 against a basket of currencies on Friday, after advancing in five of the last six trading sessions. For the week the index was up 0.2%.

The euro was up 0.3% at USD 1.08495 late on Friday.

“Investors are just now taking the opportunity to reflect back on the week and take some profits … it’s really purely a positioning play,” said Boris Kovacevic, global market strategist at payments company Convera in Vienna.

While stronger-than-expected US economic data has led traders to push out the timing of the first Fed rate cut to September, expectations for rate cuts by other central banks have also slipped.

“For as much as expectations of easing from the Federal Reserve have cooled off over the last week, it’s a similar story for central bankers around the world – ECB rate cut changes have also downshifted after lots of official commentary since Monday,” said Helen Given, FX trader at Monex USA in Washington.

Despite Friday’s retreat, the near-term outlook for the dollar was upbeat, analysts said.

“This theme of the US exceptionalism is still playing out,” Convera’s Kovacevic said.

The dollar is up almost 1% this week on the Japanese yen to 156.95 yen, even though Japanese government bond yields have climbed too, scaling decade highs and clearing 1% at the 10-year tenor.

Japan’s core inflation slowed for a second straight month in April, meeting market expectations – and staying above the central bank’s target – at 2.2%.

“It’s having very little effect on the yen,” said Martin Whetton, head of financial markets strategy at Westpac in Sydney. “The carry of holding dollars is far juicier,” he said, while policymakers’ rhetoric has also made traders nervous about inflation and the risk rate cuts would be distant or small.

The pound rose 0.3% to USD 1.27365 on Friday.

Data showed wet weather hit UK consumer spending far more than expected in April, but evidence of sticky inflation, and the surprise announcement this week of a July general election kept sterling near two-month highs.

China started a second day of war games around Taiwan. China’s yuan held steady in the offshore market at around 7.2627.

The New Zealand dollar was up 0.4% at USD 0.61225, underpinned by a hawkish shift in outlook from the Reserve Bank of New Zealand.

Among cryptocurrencies, ether was about flat at USD 3,735.90, on Friday, a day after the US Securities and Exchange Commission approved applications from Nasdaq, CBOE and NYSE to list exchange-traded funds (ETFs) tied to the price of ether, potentially paving the way for the products to begin trading later this year. For the week, ether is up about 20%.

(Reporting by Saqib Iqbal Ahmed in New York; Additional reporting by Amanda Cooper and Tom Westbrook in Singapore; Editing by Shri Navaratnam, Chizu Nomiyama, Matthew Lewis and Diane Craft)

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