On Monday, Tesla’s remarkable surge in stock price played a significant role in prolonging the market’s positive momentum as it embarked on a busy week teeming with corporate earnings releases and economic data announcements. Across the major U.S. indexes, there was a discernible uptick, with the S&P 500 advancing by 0.3%, the Nasdaq Composite edging up by 0.4%, and the Dow Jones Industrial Average climbing by 0.4%, representing a gain of 146 points.
Despite recent inflation figures surpassing expectations and raising doubts about the likelihood of interest-rate cuts in the near future, the stock market has managed to eke out gains over the past week. This resilience in the face of rising inflation has coincided with an upward trajectory in government-bond yields, consequently elevating borrowing costs across the United States.
According to investors like Jim Masturzo, Chief Investment Officer of Multiasset Strategies at Research Affiliates, the market’s gradual acceptance of the prospect of higher interest rates was perhaps long overdue. Masturzo expressed apprehension about the previous market sentiment, which had priced in multiple interest rate cuts by the Federal Reserve, suggesting that such an outlook could potentially signal a perilous scenario of economic slowdown, posing risks to the overall economy.
The upcoming Federal Reserve meeting, slated to conclude on Wednesday, is eagerly awaited by market participants as it is expected to provide additional insights into the possibility of interest rate adjustments by the end of the year. Additionally, Friday’s release of the April jobs report will offer fresh insights into the state of the U.S. economy, which exhibited signs of continued expansion in the first quarter.
Despite a marginal decline in the benchmark 10-year yield on Monday, it remains significantly higher compared to the outset of the year, thereby attracting investors to the perceived safety of government debt instruments. Notwithstanding the prevailing market volatility, certain investors, such as Jason Hsu, Chief Investment Officer at Rayliant Global Advisors, are gravitating towards investment opportunities in countries like Japan, where government interventions have been implemented to bolster the yen.
While market sentiment towards riskier assets has been somewhat cautious in recent weeks, Tesla emerged as a standout performer on Monday, experiencing a staggering 15% surge in its share price. This remarkable uptick followed news that Chief Executive Elon Musk had secured approval from Beijing to introduce the company’s driver-assistance service in China, sparking renewed investor optimism in the electric vehicle sector.
However, the day was not devoid of losses, as evidenced by declines in the shares of Google-parent Alphabet and Meta Platforms, adversely impacting the S&P 500’s communications-services sector. As the earnings season unfolds, Tuesday is poised to bring forth a flurry of corporate results, including reports from industry giants such as Amazon.com, McDonald’s, and Coca-Cola, among others.