- Apple Inc. ended the day with a 0.8% decline after introducing an augmented-reality headset.
- Data revealed sluggish growth in the US services sector in May.
- Hawkish ECB remarks have solidified expectations for further rate increases in June.
On Monday, US equities closed lower as investors deliberated the possibility of the US Federal Reserve pausing its interest rate hikes during the upcoming policy meeting. Meanwhile, Apple experienced a brief surge to a record high before eventually losing ground.
Apple Inc. ended the day with a 0.8% decline after introducing an augmented-reality headset called the Vision Pro. This is considered its riskiest and largest venture since the iPhone’s debut. Earlier in the day, Apple had risen by as much as 2.2% to reach an all-time high.
On Friday, the S&P 500 achieved its highest level in over nine months following a report indicating moderated wage growth in May. The index has experienced nearly a 20% increase since its lowest point in October. This increase was driven by strong earnings seasons and expectations of the Fed potentially pausing its aggressive monetary tightening cycle.
In line with the anticipation of a pause in rate hikes, a survey conducted by the Institute for Supply Management revealed sluggish growth in the US services sector in May. It was characterized by a slowdown in new orders.
Consequently, a measure of prices paid by businesses for inputs reached a three-year low, reinforcing the Fed’s efforts to combat inflation. Traders have estimated an approximately 80% chance of the Fed maintaining interest rates at its June 13-14 policy meeting, as indicated by CME Group’s FedWatch tool. However, they still anticipate another rate hike in July.
European equities experienced a decline on Monday as investors chose to capitalize on the gains made during the previous week. The news of weak business activity in the United States heightened concerns about an economic slowdown, overshadowing the positive performance of telecom stocks.
Despite the optimism generated by Friday’s rally, the STOXX 600 index failed to maintain this momentum. The easing of Eurozone inflation, the avoidance of a US debt default, and the growing belief that the US Federal Reserve might pause its rate hikes this month could not sustain the positive sentiment.
Meanwhile, the hawkish remarks made by European Central Bank (ECB) President Christine Lagarde and Bundesbank President Joachim Nagel solidified expectations for further rate increases by the central bank in June.