- Citigroup downgrades U.S. stocks to "neutral" from "overweight"
- China faces deflationary pressure as consumer prices weaken
- Carl Icahn separates personal loans from IEP's share price
- Indexes show mixed results: Dow rises 0.58%, S&P up 0.22%, Nasdaq slips 0.18%
According to Reuters reports, on Monday, the S&P 500 and the Dow rebounded, recovering from losses experienced last week. Investors are now eagerly anticipating a crucial inflation report and the comments from several Federal Reserve officials scheduled for this week. These updates will provide insights into the central bank's approach to interest rates.
All eyes are on the upcoming U.S. inflation data, expected to be released on Wednesday. This data will play a significant role in shaping the Federal Reserve's interest rate decision later this month. Economists surveyed by Reuters predict that consumer price growth likely slowed down in June.
Thomas Hayes, chairman at Great Hill Capital, described the current situation as an "information vacuum" until Wednesday. Citigroup strategists downgraded U.S. stocks to a "neutral" rating, emphasizing that megacap growth is due for a pullback and warning about potential U.S. recession risks.
Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley, commented, "This week has the potential to tip short-term momentum either way, depending on how traders react to inflation data (CPI and PPI) and the first batch of Q2 earnings."
This week marks the beginning of the second-quarter earnings reporting period, and investors will be assessing the impact of tight monetary conditions and concerns about an impending economic slowdown on businesses. According to Refinitiv data, earnings for S&P 500 constituents are expected to decline by 5.7% in the second quarter.
Last week, Wall Street's main indexes ended lower after a jobs report indicated a decline in unemployment for June. However, higher-than-anticipated wage growth suggested a strong labor market.
Traders still anticipate a 25 basis points rate hike by the U.S. central bank later this month. However, there is divided opinion on the trajectory of rate hikes for the rest of the year. Big banks such as JPMorgan Chase and Citigroup saw slight gains ahead of their earnings reports scheduled for Friday.
At 10:03 a.m. ET, the Dow Jones Industrial Average was up 196.47 points or 0.58% at 33,931.35, the S&P 500 was up 9.58 points or 0.22% at 4,408.53, and the Nasdaq Composite was down 24.73 points or 0.18% at 13,635.98.
Among the 11 major S&P 500 sectors, seven advanced in early trading, with industrials leading the gains with a rise of 1.3%. Home Depot was one of the top gainers on the Dow, climbing 1.8% after Jefferies raised its price target on the home improvement retailer.
Meta Platforms added 0.7% after founder Mark Zuckerberg announced that 100 million users have signed up on the conglomerate's latest social media platform, Threads. However, most other megacap growth and technology stocks experienced declines, with the FANG index sliding 1.8%.
Icahn Enterprises saw a significant jump of 15.5% after the investment firm announced that Carl Icahn and banks have finalized amended loan agreements, which separate the activist investor's personal loans from the trading price of his firm.
Chipmakers like Intel and Qualcomm recorded gains of 0.9% and 1.1%, respectively, following U.S. Treasury Secretary Janet Yellen's statement over the weekend. Yellen mentioned that meetings with senior Chinese officials were "direct" and "productive".
Advancing issues outnumbered decliners with a ratio of 2.45-to-1 on the NYSE and 2.09-to-1 on the Nasdaq. The S&P index recorded 20 new 52-week highs and four new lows, while the Nasdaq recorded 33 new highs and 24 new lows.