JUNE 21 — Wall Street’s main indexes were set to open higher today as financials and energy stocks rebounded after hawkish comments from the Federal Reserve last week led the blue-chip Dow and the benchmark S&P 500 to their biggest weekly fall in months.
Shares of banks including JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs Group Inc and Bank of America, which tend to perform better when interest rates are high, rose between 0.5 per cent and 1 per cent in premarket trading. The broader index crashed to a two-month low last week.
Value stocks, which include banks, energy and other economically sensitive sectors, led gains in US equities so far this year as investors swapped out of the growth-oriented technology stocks against the backdrop of an improving economy.
However, the Fed’s hawkish signals on monetary policy last week sparked a round of profit taking that wiped out value stocks’ lead over growth this month.
The S&P 500 value index is now down 3.9 per cent so far in June, compared with a 2 per cent rise in the tech-heavy growth index.
Fears of rising interest rates have dictated moves on Wall Street in the past few weeks, with the S&P 500 scaling record highs in June following previous comments from the Fed that shrugged off the jump in inflation as transitory.
“There is some conflicting news coming out of the Fed. Not all the presidents seem to be on the same page as the Fed chairman,” said Drew Horter, chief investment officer of Tactical Fund Advisors, in Cincinnati, Ohio.
“I’m not a believer this inflation story is over anytime soon and raising rates may come sooner than 2023.”
Investors this week will focus on US factory activity surveys, housing data and remarks from several Fed officials, including Chair Jerome Powell, who testifies before Congress on Tuesday.
“There’s going to be churning, there’s going to be consolidation. The market is historically at very frothy valuations as we head into lower volume months of the summer,” Horter said.
At 8:25 a.m. ET, Dow e-minis were up 186 points, or 0.56 per cent, S&P 500 e-minis were up 15.5 points, or 0.37 per cent, and Nasdaq 100 e-minis were up 28.25 points, or 0.2 per cent.
Exxon Mobil, Chevron Corp, Schlumberger NV and Occidental Petroleum rose between 0.9 per cent and 1.3 per cent. The energy index lost nearly 3 per cent on Friday.
Crypto stocks including miners Riot Blockchain, Marathon Patent Group and crypto exchange Coinbase Global dropped between 7 per cent and 8 per cent on China’s expanding crackdown on bitcoin mining.
Pershing Square Tontine Holdings rose 1.1 per cent after billionaire investor William Ackman’s special purpose acquisition company signed a deal to buy 10 per cent of Universal Music Group (UMG), Taylor Swift’s label, for about US$4 billion.
Market participants are also girding for probably the biggest trading event of the year this Friday, as the FTSE Russell rebalance its indexes that will reflect a wild trading year marked by the pandemic and the “meme” stock craze. — Reuters
