On Thursday, the landscape of U.S. stock index futures hinted at a cautious start as Treasury yields continued their ascent, setting the stage for the unveiling of crucial jobless claims data. These figures were eagerly anticipated by investors as they promised to shed more light on the trajectory of the Federal Reserve’s monetary policy for the remainder of the year.
Amidst this backdrop, chip designer Arm Holdings found itself in the spotlight, but for all the wrong reasons. Pre-market trading saw its shares take a significant tumble, plummeting by 8.8%. This downturn followed the revelation of a full-year revenue forecast that failed to meet market expectations, despite the company managing to surpass earnings projections for the fourth quarter. Adding to the negative sentiment, Arm’s larger rival, Nvidia, also experienced a slight decline, albeit marginal.
The downtrend extended its reach to other major players in the market, with tech giants like Apple and Meta Platforms witnessing declines of 0.2% and 0.4%, respectively. These movements were synchronized with a consecutive rise in the yield on 10-year Treasury notes, a benchmark closely watched by global investors for its impact on borrowing costs. The increase in yields came hot on the heels of an auction of 10-year notes.
In a week characterized by a lack of significant market-moving events, investor momentum appeared to stall as they grappled with uncertainty surrounding potential interest rate adjustments. Last week’s revelation of softer-than-expected payrolls data fueled speculation about the possibility of one or even two rate cuts in the pipeline for the year ahead.
Mohit Kumar, Chief Economist Europe at Jefferies, weighed in on the discussion, expressing the belief that the Federal Reserve’s next move would likely entail a rate cut. He pinpointed next week’s release of U.S. Consumer Price Index (CPI) data as a potential catalyst for market movement, hinting that should the current trading range persist, attention might shift to the employment report slated for early June.
Money market traders were observed pricing in U.S. rate cuts of 44 basis points (bps) by the end of 2024, as indicated by LSEG’s rate probabilities app. Anticipation mounted as investors awaited the unveiling of weekly jobless claims data and prepared to parse through remarks from San Francisco Fed President Mary Daly.
Boston Fed President Susan Collins contributed to the discourse by expressing confidence in the current monetary policy stance, asserting its efficacy in steering the economy toward a level conducive to achieving the Fed’s 2% inflation target.
However, amidst the mixed sentiment, Robinhood Markets managed to buck the trend, experiencing a notable gain of 4.5% after reporting better-than-expected first-quarter profit. This positive performance was attributed to robust crypto trading volumes and an uptick in net interest revenue resulting from rate hikes.
Conversely, the news wasn’t as rosy for Airbnb, which saw a significant downturn of nearly 8.3% after forecasting second-quarter revenue below market expectations.
In summary, the stock market remained in a state of flux, with investors keeping a keen eye on economic data releases and central bank commentary for cues on future policy decisions and market direction.