A big rally on Wall Street on the first trading day of the week

On Monday, the stage was set for a new transatlantic trading week – when the stock market opened, stocks were pointing higher for the three major indices. After a negative development for all three indices last week, the first trading day of the week ended with a rally:

• The Dow Jones Industrial Average, which consists of 30 handpicked stocks believed to be important, rose 0.6 percent.
• The Nasdaq Composite Index, which was dominated by technology stocks, rose 0.1 percent
• The Standard & Poor’s 500 Collective Index, which consists of 500 of the largest listed companies, rose 0.2 percent.

It’s time for results season, and many of the listed companies are presenting their results for the second quarter. During the week, investors will get an answer to how the margins of major banks, among others, JPMorgan, Citigroup and Wells Fargo, have performed.

Fall into interest rate expectations

Inflation numbers for June will be released on Wednesday. Headline inflation is expected to decline somewhat from the previous month, but core inflation will remain high.

There is less than two weeks left before the next US central bank interest rate meeting.

Interest rate expectations have fallen in recent days. Ahead of the weekend, it was almost certain that the market would see two rate hikes by the Fed, but expectations quickly subsided after the release of the US Payroll Numbers. Now the market is pricing in an 88 percent July rate hike.

Weaker-than-expected jobs report

Friday last week also saw the much-discussed jobs report, which shows how many jobs were created outside of agriculture.

The jobs report is considered by many in the market as the most important indicator of the temperature of the US economy. Among other things, it shows how many non-agricultural jobs were created last month, often referred to as “the most significant number of the month”.

Job growth was somewhat weaker than expected, but on the other hand, the report shows that wage growth was somewhat higher than expected, with monthly growth of 0.4 percent and annual growth of 4.4 percent.

Strong upward adjustment

At the previous rate meeting in June, the US central bank did exactly as expected and kept the key rate steady – but the market got a surprise.

The Monetary Policy Committee sharply revised the interest rate path upwards in its “point charts”. Dot charts tell what the members of the Federal Reserve’s interest rate committee think about the level of interest rates in the future. Prior to the meeting, this outlook was expected to point in the direction of one rate hike for the year.

The bottom line is that the Fed’s interest rate committee envisages two more rate hikes this year. In previous point charts, Fed rate committee members thought the average interest rate level would be 5.1 percent at the end of 2023. This has now been revised upward to 5.6 percent.

Three of the members expect the interest rate to rise to six percent.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.