Nasdaq 100, Dow Jones, S&P 500: Mixed Performance on Concerns over US Economy, Debt Ceiling

Daily US SPX 500

Empire State Manufacturing Index Plunges

The New York Federal Reserve’s “Empire State” index, measuring manufacturing activity in New York State, experienced a sharp drop in May, falling to -31.8, much lower than the expected -3.75.

While negative economic news can paradoxically be seen as positive for stocks, disappointing data releases still raise concerns about a potential recession. Traders ideally want the economy to be weak enough to reduce inflation but not weak enough to trigger a recession. It’s important to note that this index is considered volatile, potentially limiting its impact.

Debt Ceiling Talks Weigh on Market

In addition, ongoing negotiations between the White House and Republicans regarding the debt ceiling have contributed to a lackluster market. A meeting was scheduled, but the likelihood of reaching a deal was low. This recurring situation prompts traders to wait for a resolution through compromise, rather than engaging in a game of brinkmanship.

Indicators Shape Rate Expectations

Traders will closely monitor key economic indicators this week, including retail sales, weekly jobless claims, and housing data. Slower economic growth has raised expectations of the Federal Reserve pausing its interest rate hikes to curb high inflation.

Some Fed officials expressed expectations of sustained high-interest rates, contradicting market anticipation of a rate cut. Richmond Federal Reserve President Thomas Barkin remains cautious about inflation and supports a data-driven approach for further rate hikes. Traders will pay close attention to Fed Chair Jerome Powell’s remarks on Friday for insights into the trajectory of interest rates.

In stock market news, Meta Platforms Inc. (formerly Facebook) saw a 2.16% increase, contributing to gains in the Nasdaq and S&P 500, following a rating upgrade by Loop Capital from “hold” to “buy.”

Conversely, Oneok Inc. experienced a significant decline of 9.06% after announcing an $18.8 billion deal to acquire Magellan Midstream Partners, while Magellan’s shares surged by 12.99% in response to the acquisition news.

Another notable move was observed in Western Digital Corp., which saw its stock price rise by 11.26% following reports of expedited merger discussions with its Japanese joint venture partner, Kioxia Holdings Corp.