- Investors are mostly on the sidelines as they await more high-impact data from the US.
- Markets expect the first Fed rate cut in June due to continued resilience in the US economy.
- There is a risk that US government agencies could be shut down by Friday.
Equities closed slightly lower on Monday as markets awaited more economic data from the US for insights on the Fed’s policy outlook. At the same time, there was a bit of caution, as US government agencies could be shut down by Friday.
Recently, Nvidia gave a strong forecast that led to a rally in equity markets. Moreover, rate-cut expectations have led the S&P 500 to record 15 gains out of the last 17 weeks.
Investors are mostly on the sidelines as they await more high-impact data from the US, including the core Personal Consumption Expenditure (PCE) price index. This report is a crucial inflation gauge for the Federal Reserve and could, therefore, impact the outlook for rate cuts in the US. Additionally, investors await data on consumer confidence and manufacturing activity this week.
Currently, markets expect the first Fed rate cut in June due to continued resilience in the US economy. If data this week continues this trend, it could lead to a decline in rate-cut bets for June.
US new one-family houses (Source: Census Bureau)
Notably, data on Monday revealed that sales of new US single-family homes rose in January. Moreover, demand for new construction remained high due to a shortage of previously owned homes. Elsewhere, Dallas Fed manufacturing figures were positive, showing continued resilience in the US economy. Therefore, the Fed might keep holding on to high interest rates.
Meanwhile, there was a risk that US government agencies could be shut down by Friday without a borrowing extension. This will happen if lawmakers do not agree to pass a government funding bill by Friday.
On individual stocks, Berkshire Hathaway fell by over 2% after the US government warned of a lawsuit against its power company, PacifiCorp. This led to a pause in the recent gains after an upbeat earnings report. Meanwhile, Macron Technology shares rose more than 5% on Monday after the company started making semiconductors that will be used in Nvidia’s new chip for AI. According to Micron, the new semiconductors will use nearly 30% less power than their competitors.
Alphabet shares fell 3.5% as the company plans to relaunch its image AI tool, which it paused last week. The tool was not working properly as it gave some incorrect historical depictions.
