Sentiment on Wall Street is obscure due to the signs of easing inflationary pressure and the cooling labor market. Still, it is not enough for a clear-cut sentiment as investors are confused because dovish comments from Fed’s policymakers confront hawkish policy moves of the Reserve Bank of Australia and the Bank of Canada taken this week. All in all, the outlook for the Fed’s decision is overshadowed.
The benchmark stock indices closed mixed amid uncertain market sentiment.
The Dow Jones was the only index to close higher. It gained 91 points or 0.27%. The Nasdaq printed the heaviest loss and closed 1.29% down. The S&P 500 shed 0.38% to close at 4,267.
The major stock indices traded also mixed in the New York pre-market. The indices were making minor fluctuations. The S&P 500 is expected to trade in the narrow intraday corridor between 4,240 and 4,310.
The S&P 500 and the Nasdaq closed in the red yesterday because investors fixed profits after a multi-month rally in high-tech stocks.
Investors decided to sell shares of high-tech giants and shifted focus to companies with small market capitalization. As a result, the Russell 2000 index rose by 1.78%. The Dow Jones Transportation Index hit a six-week high, while the KBW regional banking index closed at a more than two-month high. The energy sector in the S&P climbed by 2.65% on recovery in oil prices, leading the rise.
Stocks were affected by rising yields in US Treasuries after the Bank of Canada increased interest rates. This move cemented investors’ fears about the next policy move of the Federal Reserve.
As for individual companies, Wells Fargo raised its price target for Netflix stock to 500 dollars from 400 dollars. The streaming company's shares inched up by 0.12% on the news.
Coinbase shares rose by 3.20% a day after hitting a seven-month low as the company's CEO reassured clients of the safety of their funds and accused the US Securities and Exchange Commission of bias.
As early as Thursday, the key indices reversed, but maintained weak momentum. At the same time, after a rate hike by the Bank of Canada and a reassessment of the likelihood for the Fed’s rate hike, the Wall Street VIX index rebounded after falling to a pre-pandemic low.
The data on initial jobless claims for the last week showed signs of a cooling in the labor market, but the stock indices gave a muted response to the latest statistics.The number of Americans who filed first-time claims for unemployment benefits increased sharply to 261,000 last week from 233,000 a week ago, the highest score since October 2021. The actual reading is much higher than the expected 235,000 growth. The indicator has been rising for three weeks in a row. It might prove that the labor market is cooling down.
Nevertheless, the stock indices remain under selling pressure following a rapid rally during which the S&P 500 surged by almost 20% from its October low.
Analysts suggest opposite outlooks for the S&P 500. Some of them predict that the index could slump to October levels because high borrowing costs could take their toll on the domestic economy.
The wake-up call is that the S&P 500's rally this year has been triggered by just a few mega-stocks like Microsoft and Nvidia, fueled in part by the AI ​​hype while much of the market has been in decline.
Other analysts point out that inflation has clearly subsided and the labor market is no longer overheated. Investors were also encouraged by signals that the Fed could leave interest rates unchanged at its policy meeting in June and could raise them just once more this year.
In this context, banks and analytical companies have upgraded their forecasts for the S&P 500 at the end of the year to 4,300 – 4,550. In any case, before the release of inflation data and the Fed meeting next week, the indices will move without a definite course, reacting to corporate news and profit taking.
On a case-by-case basis, Meta's shares fell by 0.7% today after EU industry chief Thierry Breton demanded the social media giant take immediate action to crack down on online child sex content as its voluntary child protection code doesn't seem to work.

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