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Economic Times
23 minutes ago
- Business
- Economic Times
Wall Street's booming June is big bet against economy doomsayers
Wall Street sees a market rally, fueled by receding trade war fears. The S&P 500 hits a record high. Investor optimism rises despite economic uncertainty. Synopsis Wall Street is celebrating a market surge fueled by receding trade war fears, with the S&P 500 hitting a record high. Investor optimism is high despite economic uncertainties and policy concerns. Cooling inflation and improved consumer sentiment are driving the rally across stocks, bonds, and commodities. Wall Street is throwing a summer party with markets just closing out their best cross-asset advance in more than a year on receding fears of a global trade war, igniting a buying frenzy in everything from tech funds to junk bonds. ADVERTISEMENT With the S&P 500 enjoying its first record since February, it's the triumph of investor optimism at a moment of high uncertainty around the economy, valuations and government policy — with the White House delivering a Friday surprise by threatening to end negotiations with Canada over a digital services tax. Still, bulls are latching onto signs of cooling inflation and improving consumer sentiment even as jobless claims rise, the housing market stays cool, global trade softens and hopes fade for an imminent Federal Reserve interest-rate cut. Rather than falter, bullish conviction has surged to levels not seen since Donald Trump returned to the White House, powering a lockstep rally across stocks, bonds, commodities and credit that rivals the broadest monthly gain since May 2024. Volatility that shook markets just weeks ago has completely faded, replaced by a headlong rush into risky bets. Retail traders have dived back in as systematic investors have hiked exposure. The exuberance now hinges on the economic backdrop delivering enough good news to justify stretched prices.'The market is exhibiting signs of complacency,' said Raphael Thuin, head of capital market strategies at Tikehau Capital. 'Across a range of potential risks — be it trade negotiations, a broadening macroeconomic slowdown, geopolitical tensions, growing fiscal deficits, or rising interest rates — market participants appear to be pricing in optimistic outcomes.'Worrywarts on the economy and markets have been famously wrong, month after month. Yet the likes of JPMorgan Chase & Co. still put the risk of a recession at 40%, citing tariffs and the prospect of weaker household spending colliding with falling business sentiment. He's among those fretting that global growth will slow in the second half of the year. ADVERTISEMENT While a report Friday showed US consumer sentiment hit a four-month high in June as inflation expectations improved, other data this week painted a less encouraging picture. Purchases of new homes fell in May by the most in almost three years. Recurring applications for unemployment benefits are now at the highest level since 2021, aligning with other data pointing to a slowdown in the labor market. Consumer spending declined in May by the most since the start of the reports were backdrop to testimony this week by Fed Chair Jerome Powell before Congress, where he said interest rates would probably be coming down already if not for uncertainty around Trump's trade policy. He joined a parade of central bank officials who made clear in speeches they'll need a few more months to be sure tariff-driven price hikes won't raise inflation in a persistent way. ADVERTISEMENT None of that derailed the risk rally. The S&P 500 surged 3.4% this week and closed at a record high. Junk bonds extended gains for a fifth week as 10-year Treasury yields fell around 10 basis points. Bitcoin is back above $100,000 and Coinbase Global Inc. hit its first record since 2021. Altogether, the pan-asset tandem rallies in June of US stocks, long-dated Treasuries, junk bonds and the Bloomberg Commodity Index set them for their best monthly performance in 13 months. ADVERTISEMENT Volatility-controlled products have been amping up exposure, with one Nomura Securities International measure showing projections for the biggest buying spree since at least 2004. Quants chasing trends across assets have also bolstered their long exposure to stocks after turning short for a few weeks, according to Barclays precarious positioning for investors, who just endured one of the more volatile quarters ever recorded, said Julie Biel, portfolio manager and chief market strategist at Kayne Anderson Rudnick.'People forget that FOMO isn't unbridled optimism, it's fear driven. So if we have weakening margins or earnings or employment data really deteriorates, there isn't a lot supporting the market,' Biel said. 'We learned the lesson earlier this year of why a narrow market isn't a robust one.' ADVERTISEMENT One sign of doubt under the surface: Popular funds tied to speculative bets that led the recent market gains — from tech disrupters and small-cap stocks to gold miners and uranium — are flashing signs of caution. Traders are loading up on protective options, with demand for downside insurance rising. In funds like the ARK Innovation ETF, the iShares Russell 2000 ETF and the VanEck Gold Miners ETF, options markets are pricing in significant downside risk, according to Barclays Schutte, CIO of Northwestern Mutual Wealth Management Company, isn't chasing the bounce, citing stretched S&P 500 valuations. He's tilted toward cheaper, small and mid-cap stocks and internationals. 'People have just been conditioned to buy the dip and until it doesn't work, that will continue,' Schutte said. 'Today you see weaker data, but no one pays heed to it just because it hasn't really worked as a signal of impending economic contraction in the past.' (You can now subscribe to our ETMarkets WhatsApp channel) Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Cyient shares fall over 9% after Q4 profit declines, core business underperforms Cyient shares fall over 9% after Q4 profit declines, core business underperforms L&T Technology Services shares slide 7% after Q4 profit dips L&T Technology Services shares slide 7% after Q4 profit dips Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first? 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Time of India
33 minutes ago
- Business
- Time of India
Trump says he won't appoint anyone to Fed who doesn't back rate cuts
U.S. President Donald Trump said on Friday he would not appoint anyone to head the Federal Reserve who would not lower interest rates from where they are, setting perhaps the most explicit litmus test yet for candidates to be the next central bank chief to align with his demands for steep rate cuts in order to get the job. "If I think somebody's going to keep the rates where they are or whatever, I'm not going to put them in," Trump said. "I'm going to put somebody that wants to cut rates. There are a lot of them out there." by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo Presidents in the past have complained about the Fed setting interest rates too high for their liking, but Trump has taken it further than any recent U.S. leader in setting a clear expectation for whomever he nominates to be in line with his wishes. Trump, who said rates should be cut to 1% from the current Fed benchmark rate of 4.25% to 4.50%, has repeatedly railed against Fed Chair Jerome Powell for not lowering borrowing costs since Trump returned to the White House in January, and he did so again on Friday. "I'd love him to resign if he wanted to, he's done a lousy job," Trump, speaking at the White House, said, while also labeling the Fed chair as "stupid." Live Events After raising rates aggressively coming out of the pandemic to combat the largest inflation outbreak since the 1970s and 1980s, the Fed lowered them a bit in the second half of last year but has not cut them since Trump returned to office. That is largely because Powell and the large majority of policymakers are concerned Trump's tariff policies in particular may rekindle inflation, and they prefer to wait longer to see if that develops before lowering rates again. Fed officials themselves have penciled in half a percentage point of cuts later this year, although that is a fraction of the reduction Trump is demanding. Trump's latest rant against Powell comes as he has largely backed away from threats to try to fire the Fed leader after a recent Supreme Court opinion appeared to align with long-standing views that presidents cannot dismiss top Fed officials over policy disagreements. The protection is seen as central to the Fed's independence from political interference in policymaking, which is seen as a critical pillar of its credibility as the world's most influential central bank. Trump has since turned his focus more to a successor for Powell, whose term as chair expires in May 2026. He has in recent weeks said he has three or four potential candidates in mind and he would make a decision soon. Most past Fed chair appointments have typically been made roughly three or four months before the vacancy was scheduled. There are about 10 months remaining in Powell's tenure as chair, and an early nomination by Trump is seen as an effort to undermine Powell's authority by giving voice to a "shadow chair" who would advocate for a different policy trajectory. Treasury Secretary Scott Bessent, seen as one of the potential candidates to replace Powell, downplayed the "shadow chair" idea, however. "I don't think anyone's necessarily talking about that," he told CNBC. Bessent noted that just one seat on the Fed Board of Governors is scheduled to open up within the year when Governor Adriana Kugler's term expires in early 2026. While Powell's term as chair expires next May, he is not required to leave the Fed altogether until his board seat expires in 2028. That leaves Kugler's expected departure as the first opportunity for a Trump appointment. "So there is a chance that the person who is going to become the chair could be appointed in January, which would probably mean an October, November nomination," Bessent said. Asked about reports that he is among the pool of candidates, Bessent said: "I'll do what the president wants, but I think I have the best job in Washington." Others seen as possible nominees for the job are White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and current Governor Christopher Waller. Waller, appointed by Trump during the Republican's first term in office, in the past week has said he is open to cutting interest rates as soon as the Fed's next meeting at the end of July.
Mint
an hour ago
- Business
- Mint
Dollar weakness not driven by changing interest rates, but because capital is moving away from US assets: Report
New Delhi [India], : The recent fall in the US dollar is no longer being driven only by changing expectations around interest rates. According to a report by Union Bank of India, the dollar's decline is now being supported by a more fundamental shift as global capital is moving away from US assets. The report stated, "The dollar's weakness is no longer being driven solely by shifting rate expectations; it is now being reinforced by a decisive reallocation of global capital". It also suggested that unless the US Federal Reserve re-establishes a clear lead in policy or US economic growth picks up speed, the report highlighted that this preference for non-US fixed income assets could continue to weigh on the dollar index in the near term. The report also noted that a number of Federal Reserve officials have recently made dovish comments, meaning they are leaning towards keeping interest rates steady or even lowering them. This has added to the pressure on the dollar, encouraging investors to increase short positions, bets that the dollar will continue to fall. Earlier in the year, the dollar index had started slipping in late February, mainly due to weaker US economic data and a gradual reassessment of the Fed's interest rate path. However, at that time, the dollar was still seeing strong support from global capital flows. For example, four-week average inflows into US equity funds were around USD 6-7 billion in late February and rose to a peak of USD 9 billion by mid-April. US bond funds also saw consistent inflows of USD 7-9 billion during this period. As per report, this showed that the initial weakness in the dollar was more linked to interest rate expectations rather than any major shift in investor confidence. But that is changing now. With geopolitical tensions largely priced in, the future of the dollar is expected to be shaped more by domestic US factors. The report outlined that the dollar's direction now appears to be guided less by global interest rate trends and more by shifting capital flows and local US events. This article was generated from an automated news agency feed without modifications to text.
Economic Times
2 hours ago
- Business
- Economic Times
S&P 500, Nasdaq hit record closing highs amid trade negotiations, rate cut bets
Volume on U.S. exchanges was 22.07 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days. Wall Street surged on Friday, propelling the S&P 500 and Nasdaq to record highs amid trade optimism and expectations of Federal Reserve rate cuts. Despite a brief setback caused by President Trump's termination of trade talks with Canada, all major indexes posted weekly gains. Economic data, including consumer spending and sentiment reports, further solidified expectations for monetary easing. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads NEW YORK: Wall Street extended its rally on Friday, sending S&P 500 and Nasdaq to all-time closing highs as trade deal hopes fueled investor risk appetite and economic data helped solidify expectations for rate cuts from the U.S. Federal pared gains after U.S. President Donald Trump terminated trade negotiations with Canada in response to its digital tax on technology so, all three major U.S. stock indexes posted weekly gains. Upon reaching its record closing high, the tech-heavy Nasdaq confirmed it entered a bull market when it touched its post "liberation day" trough on April blue-chip Dow remained 2.7% below its record closing high reached on December 4."This market's been pretty resilient," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "Investors are riding momentum and looking for breakouts.""They don't want to get caught on the wrong side of this thing," Carlson added. "Many investors already have missed out. And now you have the S&P flirting with an all-time high."The Personal Consumption Expenditures report from the Commerce Department showed consumer income and spending unexpectedly contracted in May. And while tariffs have yet to affect price growth, inflation continues to hover above the Fed's 2% annual inflation target.A separate report from the University of Michigan confirmed consumer sentiment has improved this month, but remains well below December's post-election markets have priced in a 76% likelihood that the Fed will implement its first rate cut of the year in September, with a smaller, 19% probability of a rate cut coming as soon as July, according to CME's FedWatch and Beijing reached an agreement to expedite rare-earth shipments from China to the U.S., a White House official said, well ahead of the July 9 expiration of the 90-day postponement of U.S. President Donald Trump's "reciprocal" U.S. Treasury Secretary Scott Bessent said the administration's trade deals with 18 of the main U.S. trading partners could be done by the September 1 Labor Day Dow Jones Industrial Average rose 432.43 points, or 1.00%, to 43,819.27, the S&P 500 gained 32.05 points, or 0.52%, to 6,173.07 and the Nasdaq Composite gained 105.55 points, or 0.52%, to 20, the 11 major sectors of the S&P 500, consumer discretionary enjoyed the biggest percentage gain, while energy shares were the laggards. Chipmaker Micron's MU.O upbeat forecast revived investor confidence in artificial intelligence-related stocks, while Nvidia NVDA.O rose 1.8%, edging closer to $4 trillion market capitalization after reclaiming its position as the world's most valuable shares NKE.N jumped 15.2% after forecasting a smaller-than-expected drop in first-quarter revenue. Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the were 347 new highs and 55 new lows on the NYSE. On the Nasdaq, 2,111 stocks rose and 2,342 fell as declining issues outnumbered advancers by a 1.11-to-1 S&P 500 posted 35 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 101 new highs and 68 new on U.S. exchanges was 22.07 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days.
Arab News
2 hours ago
- Business
- Arab News
As US inflation edges up, Trump renews criticism of Fed chief, calling him ‘stubborn'
WASHINGTON: The US Federal Reserve's preferred inflation measure logged a mild uptick Friday while spending weakened, triggering another tirade by President Donald Trump against the central bank chair for not cutting interest rates sooner. 'We have a guy that's just a stubborn mule and a stupid person,' Trump told an event at the White House, referring to Fed Chair Jerome Powell. 'He's making a mistake.' With Powell's term as Fed chief coming to an end next year, Trump hinted at his choice of successor: 'I'm going to put somebody that wants to cut rates.' The president's remarks came after government data showed the personal consumption expenditures (PCE) price index climbing 2.3 percent last month from a year ago in May. This was in line with analyst expectations and a slight acceleration from April's 2.2 percent increase, but still a relatively mild uptick. Excluding the volatile food and energy sectors, the PCE price index was up 2.7 percent, rising from April's 2.6 percent uptick, the Commerce Department's report showed. But consumer spending declined, after Trump's fresh tariffs in April dragged on consumer sentiment. PCE dropped by 0.1 percent from the preceding month, reversing an earlier rise. While Trump has imposed sweeping tariffs on most US trading partners since returning to the White House in January — alongside higher rates on imports of steel, aluminum and autos — these have had a muted effect so far on inflation. This is in part because he held off or postponed some of his harshest salvos, while businesses are still running through inventory they stockpiled in anticipation of the levies. But central bank officials have not rushed to slash interest rates, saying they can afford to wait and learn more about the impact of Trump's recent duties. They expect to learn more about the tariffs' effects over the summer. 'The experience of the limited range of tariffs introduced in 2018 suggests that pass-through to consumer prices is intense three-to-six months after their implementation,' warned economists Samuel Tombs and Oliver Allen of Pantheon Macroeconomics in a note. They flagged weakness in consumer spending, in part due to a pullback in autos after buyers rushed to get ahead of levies. And spending on services was tepid even after excluding volatile components, they said. 'There has also been a clear weakening in discretionary services spending, notably in travel and hospitality,' said Michael Pearce, deputy chief US economist at Oxford Economics, in a note. This reflects 'the chilling effect of the plunge in consumer sentiment,' he added. Between April and May, the PCE price index was up 0.1 percent, the Commerce Department report showed. As a July deadline approaches for higher tariff rates to kick in on dozens of economies, all eyes are also on whether countries can reach lasting trade deals with Washington to ease the effects of tariffs. For now, despite the slowing in economic growth, Pearce said risks that inflation could increase will keep the Fed on hold with interest rates 'until much later in the year.'
