The New York Stock Exchange closed down on Friday to end a very dynamic half-year for the indices, while American inflation slowed slightly, as expected.
The Dow Jones index fell 0.12% to 39,188.86 points. The Nasdaq, with a strong technology bias, and the S&P 500, which during the session nearly reached new records, fell by 0.71% to 17,732.60 points and by 0.41% to 5,460.48 points respectively.
While Wall Street had started in the green welcoming inflation in the United States which had stalled, the indices changed direction in the wake of a sudden rise in bond yields.
Ten-year rates rose to 4.35% from 4.28%. Karl Haeling of LBBW said the sudden tension in the bond market could be explained by the approach of an intervention by the Bank of Japan (BoJ) to support the yen.
“There has been talk in the market all week of the BoJ’s intention to wait for the publication of the American PCE inflation index to intervene when trade is weak, which would cost less money to support the yen” , explained Mr. Haeling.
“The last time they intervened was on a Friday afternoon New York time,” the analyst recalled.
If this hypothesis is true, yields on bonds rise because Japan may sell US Treasuries to finance its intervention.
A delayed reaction to the presidential debate the day before between Joe Biden and Donald Trump cannot be ruled out to explain the decline in stocks at the end of the session.
While the debate seems to have turned in favor of the Republican candidate, some investors fear that the policy of an elected Donald Trump “will be inflationary, with increases in import taxes,” Karl Haeling stressed.
Even with a slight decline on Friday, stocks nevertheless closed with a fabulous quarter, or even half-year.
Over the first six months of the year, the Nasdaq, boosted by the enthusiasm around interactive artificial intelligence and the semiconductor sector, soared by almost 20%.
The broader S&P 500 index rose more than 15% while the Dow Jones advanced 4%.
On Friday, the U.S. Commerce Department released the PCE inflation index, the Fed’s preferred measure of price movements, which slowed as expected in May.
It stood at 2.6% over a year, after 2.7% in April.
Over the month, prices remained the same, with the inflation rate being zero, compared to +0.3% the previous month.
The annual change in PCE “has decelerated to its slowest pace since 2021 and is within reach of the Fed’s 2% target,” said Rubeela Farooqi, chief economist at High Frequency Economics.
For Peter Cardillo of Spartan Capital, “this shows that inflation has peaked and is moving in the right direction.”
On the value front, semiconductors, the Nasdaq’s favorite sector with Nvidia (-0.36%), remained positive.
AMD gained 1.72%, Qualcomm 2.07% and Taiwan Semiconductor Manufacturing, which is approaching the $1 trillion mark in stock market valuation, gained 1.28%.
Nike stock collapsed 19.99% for the worst session in its history after mixed results in the fourth quarter. At $12.6 billion, quarterly sales disappointed, notably with poor performance in China.
Retailer Foot Locker lost 2.35%.
The DJT stock of Donald Trump’s social network, Trump Media and Technology Group sank 10.84% after an acrimonious televised debate between President Joe Biden and candidate Donald Trump.
Semiconductor company Infinera soared 15.78% to $6.09 after Finland’s Nokia announced it was buying the company in a deal valued at $2.3 billion.
Nasdaq
