Michael M. Santiago
After a strong rally that has seen the benchmark S&P 500 (SP500) and the tech-heavy Nasdaq Composite (COMP.IND) post six-day win streaks, Wall Street took a beat on Friday, with the major averages struggling for direction.
By afternoon, the Nasdaq was up 0.03% to 13,787.08 points, while the blue-chip Dow (DJI) was higher by 0.21% to 34,481.85 points. The S&P added 0.26% to 4,437.27 points.
All 11 S&P sectors were trading in the green, with the exception of Materials. Utilities and Energy topped the leaderboard.
The S&P was on track for a fifth straight positive week, having added 3.22% for the five-day session. The Nasdaq was up 3.98% while the Dow was up 1.79%.
Treasury yields were higher. The longer-end 10-year yield (US10Y) was up 5 basis points to 3.78% while the 2-year yield (US2Y) – which is more rate-sensitive to the Fed’s moves – was up 9 basis points to 4.74%. Meanwhile, the dollar index (DXY) was higher by 0.20% to 102.32.
On Thursday, markets finished with hefty gains. Investors have appeared to overlook the Federal Reserve’s signal that further rate hikes are on the cards. Market participants have instead bolstered their expectations that the central bank will have to end its aggressive tightening cycle sooner rather than later.
“Risk assets are exhibiting few nerves at the moment and have continued their relentless advance over the last 24 hours, with the S&P 500 rising for a 6th consecutive session on Thursday for the first time since November 2021,” Deutsche Bank’s Jim Reid said.
On Friday, gains in the Nasdaq Composite (COMP.IND) were capped by a retreat in chipmakers, after Micron Technology (MU) warned that about half of its revenue from China is at risk of being lost. Meanwhile, Advanced Micro Devices (AMD) was also lower. Morgan Stanley analysts bumped the firm from its top pick, replacing it with NVIDIA (NVDA).
Turning to the economic calendar, the University of Michigan’s gauge of consumer sentiment in June came in higher than expected. Moreover, year-ahead inflation expectations came in at +3.3%, much lower than the anticipated +4.4% figure.
“Sentiment is improving, albeit at still-depressed levels. We think the bigger story in today’s University of Michigan survey is the fact that inflation expectations are rolling over,” Wells Fargo’s Tim Quinlan said.
“The 5-10 year outlook for inflation edged slightly lower to come in at 3.0% in June, though that is only one tenth of a percent off the highest expected inflation reading over this cycle. That is not the sort of retreat in inflation expectations (Fed) policymakers will need to see to become convinced that inflation expectations are finally headed lower after a 15-month regimen of rate hikes,” Quinlan added.
Turning to active stocks, Adobe (ADBE) was the top percentage gainer on the S&P 500 (SP500) after the design software maker reported a beat-and-raise quarter. Analysts were also positive over its artificial intelligence prospects.
Virgin Atlantic (SPCE) shares took off after the company said it would start commercial spaceflight operations later this month.
