Stocks got off to a strong start thanks to positive inflation news, but major indexes lost momentum as trading got longer as investors looked to lock in profits from a strong first half of the year.
Prior to the opening, Bureau of Economic Analysis He said the personal consumption expenditures (PCE) price index, which measures consumer spending, was unchanged from April to May. Food and other volatile items were the main drivers. energy Costs increased just 0.1% month-on-month.
Headline and core PCE both rose 2.6% from a year earlier, slowing from April but in line with economists’ expectations.
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The data suggests “the deflation process is continuing, reversing the decline from the first quarter of 2024,” he said. Sonu Varghese“We expect the Fed to cut rates at least twice this year, probably starting in September,” said John McCain, global macro strategist at Carson Group.
According to CME Group futures traders, the chances of the Fed delivering its first quarter-point rate cut at its September meeting are now estimated at 60%, up from 45% a month ago. FedWatchToolsThe chances of a second rate cut at the November or December meeting are 23% and 18%, respectively.
Nike has its worst day since reporting earnings
In individual stock news, Nike (NKE), the sportswear and footwear retailer fell 20%, its worst day ever. Reported RevenueNike beat expectations in the fourth quarter, but revenue fell short of expectations, and the company also said it expects first-quarter and full-year sales to decline due to a variety of headwinds, including ongoing challenges at Nike Digital and a slowdown in China.
NKE was already one of the worst Dow Jones Stock Price With 2024 outlooks solidifying heading into today’s trading, today’s drop will only create a bigger hole for blue chip stocks to climb out of.
“It’s unlikely that many investors will view this as a ‘buy on the pullback’ event. Until new product innovation really starts to emerge and management regains investor confidence, NKE stock will likely remain in the penalty box so to speak,” Wedbush analysts said. Tom NikicNikic maintained his outperform (buy) rating on Nike but joined several others in lowering his price target on the stock.
Nokia to buy Infinera for $2.3 billion
The positive side of Friday Infinera (INFN) rose 15.8%. Nokia (Norwegian krone, +1.3%) said it would acquire the company for $2.3 billion, or $6.65 per INFN share, a 28% premium to last night’s closing price.
The deal “combines two small, underperforming competitors in the slow-growth optical networking market and brings INFN’s leading technology to NOK, which it will leverage in its global distribution channels,” Needham analysts said. Ryan Koontzhas a Hold rating on Infinera.
Regarding the main indicators, Dow Jones Industrial Average The number of cases decreased by 0.1% to 39,118. S&P 500 It fell 0.4% to 5,460. Nasdaq Composite Index It fell 0.7% to 17,732. All three indexes ended the first half of the year with solid gains, and most strategists expect the momentum to continue in July.
July tends to be a strong month for stocks
In fact, “stock prices have risen an average of 4.8% in July over the past three years, outperforming all other months,” he said. Mike DixonHead of Research at Horizon Investments.
One reason is that stocks tend to trade less in July as many market participants go on vacation, “so any new developments — especially surprising ones — could have outsized impact and market-moving power,” Dixon said.
Major events to watch next month include the announcement of second quarter financial results and Next Fed MeetingDixon adds.
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