Dow Slips Amid Rising Inflation Expectations; Nasdaq Gains on Meme Stock Surge

Vida Markets

Tuesday 14th May 2024, 12:37 pm Time to read: 6 mins.

Despite recent gains, the Dow Jones Industrial Average experienced its first losing day in nine sessions on Monday, reflecting rising inflation concerns among consumers. The slight dip in the S&P 500 was offset by gains in the tech-heavy Nasdaq Composite, driven by a remarkable surge in GameStop shares. As inflation expectations climb, with key economic

Despite recent gains, the Dow Jones Industrial Average experienced its first losing day in nine sessions on Monday, reflecting rising inflation concerns among consumers. The slight dip in the S&P 500 was offset by gains in the tech-heavy Nasdaq Composite, driven by a remarkable surge in GameStop shares. As inflation expectations climb, with key economic reports on the horizon, the market shows a mix of caution and hope, much like the fluctuations seen earlier this year. Investors remain focused on upcoming data releases and Federal Reserve signals, navigating a landscape marked by both inflationary pressures and robust tech stock performance.

Key Takeaways:

Dow Jones Slips Amid Inflation Concerns: The Dow Jones Industrial Average fell 81.33 points, or 0.21%, to close at 39,431.51, marking its first losing day in nine sessions. This decline follows a New York Federal Reserve survey showing a rise in inflation expectations among consumers.
Nasdaq Gains on GameStop Surge: The Nasdaq Composite rose 0.29% to finish at 16,388.24, boosted by an 87% surge in GameStop shares. This increase came after "Roaring Kitty," a prominent Reddit trader, posted online for the first time in three years, reigniting interest in the meme stock.
S&P 500 Slightly Lower: The S&P 500 slipped 0.02%, settling at 5,221.42. Despite the minor dip, the index remains within 1% of its all-time intraday high set in March, reflecting overall market resilience.
Rising Inflation Expectations: According to a New York Federal Reserve survey, consumers' one-year inflation expectations increased to 3.3%, while their five-year outlook ticked up to 2.8%. This rise in expectations comes ahead of key inflation reports due later this week.
European Markets Close Mixed: The pan-European Stoxx 600 ended the session little changed, with the FTSE 100 Index down 0.22% to 8414.99. Shares of Danish shipping company Maersk rose 8.1%, while Siemens Energy fell 4.2%.
Asia Markets React to China Inflation Data: China's consumer price index rose 0.3% year-on-year, beating estimates, while the producer price index fell 2.5%. Japan's Nikkei 225 closed 0.13% lower at 38,179.46, and South Korea's Kospi ended flat at 2,727.21.
Treasury Yields Dip: The yield on the 10-year Treasury fell 2 basis points to 4.485%, and the 2-year Treasury yield decreased nearly 1 basis point to 4.861%. Investors are closely watching for upcoming inflation data and Federal Reserve comments.
SoftBank Vision Fund Gains: SoftBank's Vision Fund posted a gain of 724.3 billion yen ($4.6 billion) for the fiscal year ended March, its first annual profit since 2021. However, SoftBank still reported an overall loss of 227.6 billion yen for the fiscal year.
Oil Prices Rise on Demand Optimism: Brent crude futures rose 0.5% to $83.21 a barrel, while US West Texas Intermediate crude futures increased by 0.8% to $78.92 a barrel. Improved demand in China and potential supply disruptions in Canada contributed to the price rise.
FX Today:

Gold Price Slide Amid Risk-On Mood, Upcoming US Data: Gold prices retreated sharply on Monday from near $2,350, even though US Treasury yields declined, undermining appetite for the Greenback. XAU/USD's first support would be the May 9 low of $2,306, followed by the $2,300 figure. Once cleared, the next stop would be the 50-day Simple Moving Average (SMA) at $2,249. On the other hand, if buyers reclaim $2,359, look for a test of the April 26 high at $2,352. A breach of the latter would expose the $2,400 figure, immediately followed by the April 19 high at $2,417 and the all-time high of $2,431.
Silver Respects Zone of Resistance Ahead of US CPI: The XAG/USD bulls are facing resistance, with a daily close below $28.00 potentially paving the way for further losses. The first support would be at $27.70, followed by April 15's low of $27.59. Once cleared, the next stop would be the 50% Fib retracement at $27.06. Conversely, if Silver stays above $28.00, it could open the door for a bullish continuation. The first resistance would be May 10 high at $28.76. Once cleared, key resistance levels surface at the $29.00 figure, followed by the year-to-date (YTD) high of $29.79.
EUR/USD Breaches Downtrend from March, but Fed Data Caps Gains: The dollar index fell 0.11% on Monday. EUR/USD rose 0.19% to $1.0789, having come off its 1.0807 high and back to the 200-day moving average and downtrend line from March by 1.0790 following the New York Fed survey that took Treasury yields off their lows.
GBP/USD Remains in a Narrow Range: Sterling rose 0.26%, helped by tighter gilts-Treasury yields spreads. Its 1.2569 high was tied with last Tuesday's high. A close above the 50-DMA by 50% of the 1.2893-1.2300 March-April drop at 1.2596 looks key for bulls.
USD/JPY Aims for Higher Ground Following BoJ Comments: The USD/JPY pair finally pushed above 156.20. A close above the May 2 high and daily pivot point at 156.28 would brighten prospects for 157.04, though the latter looks more likely if upcoming US data support Treasury yields and stall Fed-BoJ policy convergence.
Canadian Dollar Stuck in the Middle on Tepid Monday: The USD/CAD is struggling to find momentum on Monday, holding in place near 1.3680. Bids are treading water just above a near-term supply zone from 1.3660 to 1.3615. Topside momentum is capped by the 200-hour Exponential Moving Average (EMA) just below the 1.3700 handle, while short-sellers have been unsuccessful in dragging the pair back down to 1.3600.
Cocoa Prices Tumble 19%, Head for Biggest Daily Drop Since at Least 1980: Cocoa prices dropped more than 19% on Monday, giving up some of the gains that boosted the commodity toward record highs this year. Prices last traded at around $7,175, after dropping about $1,700 per metric ton. This drop marks the biggest intraday decline since at least 1980.
Market Movers:

Squarespace Jumps on Private-Equity Deal: Squarespace shares soared 13.3% following the announcement of a $6.9 billion all-cash deal to go private with private-equity firm Permira. The deal values Squarespace at $44 per share, representing a 30% premium to its unaffected share price.
Arm Holdings Gains on AI Chip News: Arm Holdings saw its stock price jump 7.7% after a report from Nikkei indicated that the company is planning to launch its first artificial intelligence chips next year, boosting investor confidence.
Incyte Climbs on Share Repurchase Program: Incyte shares climbed 8.6% after the biopharmaceutical company announced a $2 billion share repurchase program, signalling strong confidence in its financial health and future growth.
Walgreens Boots Alliance Rises on Sale News: The stock of Walgreens Boots Alliance advanced 5.4% after reports surfaced that the company is seeking potential buyers for its $8.8 billion Boots drugstore chain in the UK, which could significantly impact its business strategy.
Xponential Fitness Volatile on Executive Suspension: Xponential Fitness shares experienced significant volatility, initially dropping more than 9% to a 52-week low before rebounding to close nearly 11.3% higher. This movement followed the suspension of the company's top executive without a set return date.
Intel Up on Factory Deal Talks: Intel gained 2.2% after The Wall Street Journal reported that the company is in talks with Apollo Global Management for an $11 billion deal to build a new factory in Ireland, indicating significant expansion plans.
SolarEdge Technologies Surges Despite Downgrade: SolarEdge Technologies saw its stock rise 5.5%, even after being downgraded to neutral. Concerns over the company’s future gross margin were outweighed by positive market sentiment, leading to the increase.
American Airlines Leads Airline Stocks Higher: American Airlines gained 3.7%, while United Airlines and Delta Air Lines added 3.2% and 1%, respectively, following HSBC's initiation of coverage with buy ratings. HSBC highlighted the benefits of rebounding international travel and corporate demand.
As the trading session closed, the market exhibited mixed sentiment driven by rising inflation expectations and significant stock movements. The Dow Jones experienced its first loss in nine sessions, reflecting cautious investor sentiment amid inflation concerns. In contrast, the Nasdaq continued to climb, lifted by a remarkable surge in GameStop shares. European markets remained mixed ahead of critical US inflation data, while Asian markets reacted to China's latest economic indicators. Key commodities like gold and cocoa saw sharp declines, highlighting ongoing market volatility. As traders anticipate upcoming economic reports, the overall mood remains hopeful, with a focus on navigating the balance between inflation pressures and investment opportunities.

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