THE GIST (“THE WHAT”)
The S&P 500 index broke its six-day winning streak to close modestly lower by 16.25 points (0.37%) at 4409.60. The index, however, registered its longest winning streak of five straight weeks since November 2021 as markets cheered the Fed’s decision to pause its aggressive monetary tightening cycle following signs of slowing pace of inflation.
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THE DETAILS (The “How & Why”):
Markets cheered the Fed’s decision this week to refrain from raising interest rates, albeit not ruling out further rate hikes for the remaining part of the year in the wake of a stubbornly sticky inflation and resilient labor market. The S&P 500 index jumped at the open following University of Michigan’s U.S. June 1-year inflation expectations that came in at a 2-year low at 3.3% from 4.2% in May. Gains, however, faded following hawkish comments by Richmond Fed President Barkin that inflation remains stubbornly persistent and could justify further monetary tightening.
Tech stocks pulled back alongside rising yields. The 10-year Treasury yield rose 5.2 basis points to settle at 3.769%. Advanced Micro Devices fell 3.35% after Morgan Stanley excluded the chip manufacturer from its top pick in the U.S. semiconductor sector, replacing it with Nvidia. Micron Technology also shed 1.69% after the chip maker announced that almost half of its revenue from China could be impacted due to curbs placed on its products by the China Cybersecurity Administration.
Regional banks added to the losses, led by 1.21% decline Zions Bancorp following stock downgrades amid rising funding costs. Humana Corp led the losses in health insurers on warnings of higher-than-anticipated medical costs that are expected to persist throughout the year.
Limiting the day’s losses, Ball Corp led the gainers within the index, soaring 7.23% after the world’s largest supplier of beer cans announced its intention to sell its aerospace and national defense hardware business for over $5 billion. Corning Inc. and Dish Network Corp were the other strong performers of the session, up 5.94% and 3.69%, respectively.