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BusinessU.S. stocks open higher as new month and Fed...

U.S. stocks open higher as new month and Fed quantitative tightening kick off


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U.S. stock indexes opened higher on Wednesday, led by technology stocks, at the start of a new month of trading, with the quarterly earnings reporting season winding down, while the Federal Reserve begins reducing its nearly $9 trillion balance sheet.

How are stock indexs trading?
  • The Dow Jones Industrial Average 
    gained 274 points, or 0.8%, to 33,239.

  • The S&P 500
    rose 31 points, or 0.8%, to 4,164

  • The Nasdaq Composite
    were up 137 points, or 1%, to 12,215

On Tuesday, the Dow industrials
fell 222.84 points, or 0.7%, to close at 32,990.12, snapping six-straight sessions of wins. The S&P 500 
fell 0.6% to 4,132.15, and the Nasdaq Composite 
finished down 0.4% at 12,081.39, with both indexes snapping three consecutive days of gains.

Read: The man who seized one of Argentina’s ships now warns there will be a wave of emerging-market defaults

What’s driving the market?

Investors are waiting to see if last week’s bounce in stocks will hold, after losses on Tuesday amid higher Treasury yields and oil prices. The yield on the 10-year Treasury 
 note rose 5 basis points to 2.876% on Wednesday, according to Dow Jones Market Data.

U.S. crude oil prices
were up another 1.5% to $116.40 a barrel and international benchmark Brent
rose 1.6% to $117.44. Oil prices rose Tuesday after the EU slapped new sanctions on Russian crude, but pulled back after The Wall Street Journal reported some members of the OPEC were considering suspending Russia from oil-production targets.

Investors remain worried that the Federal Reserve’s attempts to lower inflation by raising interest rates may result in a recession as food and energy costs jump pressuring consumer spending.

U.S. economic data will swing into focus Wednesday with a May update on the Institute for Supply Management’s manufacturing index due at 10 a.m. ET, along with the S&P Global final reading of its purchasing managers’ index for the manufacturing sector. St. Louis Fed President James Bullard is due to speak at 1 p.m. ET and the Fed will publish its Beige Book on economic conditions later in the session.

“The pressure on the equity markets may pick back up, somewhat ironically, if US data through Friday’s May jobs report, and the May ISM Services suggest that U.S. growth is humming along at a solid clip, taking US yields back toward cycle highs,” said a team of strategists at Saxo Bank, in a note to clients.

As well, investors will be keeping an eye on the liquidity impact of shrinking of the Fed’s massive balance sheet, which starts Wednesday and is aimed in part at helping fight high inflation.

“Uncertainty over the impact of Fed QT that kicks off today and ramps up to full force over the next three months to a pace of $95 billion/month could also prove a factor weighing on sentiment,” added the Saxo Bank strategists.

Read: Fed’s quantitative tightening is about to arrive: What that might mean for markets

U.S. Treasury Secretary Janet Yellen admitted in an interview Tuesday that she was “wrong” last year in believing U.S. inflation would not pose a long-term problem, but President Joe Biden said he would leave it to the Fed to solve the inflation problem.

Elsewhere, Atlanta Fed President Raphael Bostic told MarketWatch in an exclusive interview on Tuesday that any September “pause” in the central bank’s push to raise interest rates shouldn’t be construed as a “Fed put,” or sign that the central bank will come to the rescue of markets.

Earnings reports after the market close are expected from meme stock GameStop Corp.
pet products retailer Chewy Inc.
and on the tech side, NetApp Inc.
and Hewlett Packard Enterprise Co.

What companies are in focus?
  • Salesforce Inc. stock
    jumped 12% after the cloud-based customer-relationship-management company hiked its earnings forecasts.

  • Capri Holdings Ltd.
    stock rose 3.7% after the luxury fashion company reported a big earnings beat and $1 billion buyback program.

  • HP Inc.
    shares gained 4% after it posted another strong quarter of personal computer sales and raised its earnings outlook Tuesday.

  • Adamis Pharmaceuticals Corp
    shares edged up 1% after a panel recommended a Covid-19 study continue.

  • Delta Airlines
    lost 1%, despite that the company raised its revenue forecast as travel recovers from the pandemic.

How are other assets trading?
  • The ICE U.S. Dollar Index 
     a measure of the currency against a basket of six major rivals, was up 0.2%.

  • Bitcoin BTCUSD, -0.81% was trading about 0.7% higher at $31,780.

  • Gold for August delivery

    fell 0.5% to $1,838.70 an ounce.

  • In European equities, the Stoxx Europe 600 
    fell 0.1% and London’s FTSE 100 
    edged up 0.1%.

  • In Asia, the Shanghai Composite 
    closed down 0.1%, the Hang Seng Index 
    fell 0.6% in Hong Kong, and Japan’s Nikkei 225 
    rose 0.7%.

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