The S&P 500 and the Nasdaq hit record levels shortly after the open on Monday as tech-related growth stocks edged up, while investors awaited data on the health of a U.S. labour market recovery and corporate earnings later in the week.
The Dow Jones Industrial Average fell 5.7 points, or 0.02%, at the open to 34428.1. The S&P 500 rose 4.2 points, or 0.10%, at the open to 4284.9, while the Nasdaq Composite rose 57.4 points, or 0.40%, to 14417.811 at the opening bell.
Canada’s TSX was up 0.03% in early trade. On Friday, it finished at 20,230.26, up 15.14 points or 0.07%.
For a new record high close today, it must finish above the all-time peak of 20,231.32 it set on Jun 15.
Globally, investors are taking a cautious start to the week’s first trading day. Most major equity markets in Europe and Asia were trading slightly weaker, with a spike in coronavirus cases in some parts of the globe keeping investors on the sidelines.
Stock markets across the world rebounded last week and were in touching distance of record highs as concern ebbed about future tightening from the U.S. Federal Reserve.
“It would appear, on the face of it, that investors have recovered some of the confidence that was briefly lost in the immediate aftermath of the most recent Federal Reserve policy decision,” said Michael Hewson, chief market analyst at CMC Markets.
In corporate news this morning, Canada’s real estate service provider Brookfield Business Partners LP announced on Sunday an agreement to acquire UK-based Modulaire Group, backed by private equity firm TDR capital, for $5 billion.
The TSX underperformed U.S. markets for much of last week, even as it added 1.2%.
The TSX underperformance last week was broad based, with energy and banks lagging their U.S. peers, noted BMO economist Robert Kavcic in a report this morning.
“On the year, Canada is still ahead (of the U.S. market) by 2 percentage points, but the index has lost ground over the past three months. Is this is as good at it gets for Canada? Financials have surged on economic reopening, a steeper yield curve and strong capital markets activity. Energy has been on a tear alongside the rally in oil prices. Combined, that’s half the index right there,” he wrote.
Today brings little in fresh economic or earnings reports to shake things up.
The S&P 500 on Friday logged its best weekly performance in 20 following an agreement on President Joe Biden’s $1.2 trillion infrastructure spending deal and waning concerns about a sooner -than-expected policy tightening from the Federal Reserve.
The tech-heavy Nasdaq’s 4.4% gain is outpacing its peers in June as investors pile back into tech-oriented growth stocks on waning worries about runaway inflation.
With the S&P 500 up almost 14% as the first half of 2021 draws to a close, activity in some areas of the market indicates concern over potential volatility, with some investors suggesting the market may be overdue for a significant pullback.
Short interest in the SPDR S&P 500 ETF Trust increased to its highest level this year since last week’s Fed meeting, suggesting investors have been adding more downside protection, JP Morgan analysts said in a recent note.
At the same time, gains this month have been more concentrated, as investors pile back into the big technology stocks that led markets higher last year and for most of the past decade. As of Thursday, the equal-weight S&P 500 had fallen 0.5 per cent in June, while the benchmark index was up 1.5 per cent, a sign the average stock is lagging that some investors also view as evidence of waning confidence in the strength of the market’s advance.
Oil prices slipped on Monday after hitting more than 2-1/2 year highs earlier in the session, as a spike in COVID-19 cases in Asia put a brake on their rally before this week’s OPEC+ meeting.
Brent was down 20 cents, or 0.3%, to $75.98 a barrel at 1040 GMT, after climbing to $76.60, its highest since October 2018. U.S. crude was 10 cents, or 0.1%, lower at $73.95 a barrel.
But analysts said the rally had not yet run out of steam.
“With sentiment running high, market watchers say crude prices are likely to keep rising ... Vaccination rollouts and strong summer demand make for a potent bullish cocktail,” said Stephen Brennock of oil broker PVM.
Oil prices rose for a fifth week last week as fuel demand rebounded on strong economic growth and increased travel during the northern hemisphere summer, while crude supplies were tight as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, maintained production cuts.
Gold traded in a tight range on Monday as investors remained on the sidelines given the U.S. Federal Reserve’s mixed signals on policy tightening, although a weaker dollar limited losses for the metal.
Copper edged lower on Monday as slowing profit growth in industrial firms in top consumer China metals, rising inventories and low premiums sapped enthusiasm for the metal.
Benchmark three-month copper on the London Metal Exchange (LME) shed 0.3% to $9,387 a tonne by 1120 GMT. The metal hit a record of $10,747.50 per tonne in May.
Profit growth at China’s industrial firms slowed again in May as surging raw material prices squeezed margins and weighed on factory activity.
High prices spurred the Chinese government to cool prices by releasing some of its metal stockpiles.
Currencies and bonds
The Canadian dollar is trading with a modestly softer tone this morning, but remains above 81 cents US. The 10-year U.S. Treasury yield is a bit lower this morning, hovering at about 1.511%.
Investors are weighing rising coronavirus cases in Australia and Asia, with the currency giving back some of last week’s advance. Sydney plunged into a lockdown after a cluster of cases involving the highly contagious Delta strain ballooned.
Last week, the loonie advanced 1.4% as investors grew less worried about the recent hawkish shift from the Federal Reserve.
Still, speculators have cut their bullish bets on the Canadian dollar for a third week, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of June 22, net long positions had fallen to 43,225 contracts from 44,254 in the prior week.
Canada’s GDP report for April is due on Tuesday which could offer clues on the strength of the economy. Investors are also awaiting U.S. payrolls data and an OPEC+ meeting later in the week.
Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year eased 2.8 basis points to 1.431%.
Other corporate news
Boeing Co fell 1.4% after the U.S. Federal Aviation Administration told the planemaker that its planned 777X is not yet ready for a significant certification step and warned it “realistically” will not certify the airplane until mid- to late-2023.
U.S-listed shares of Chinese tech giant Baidu rose 1.2% after its smart electric vehicle venture with automaker Geely, Jidu Auto, hired Frank Wu, formerly at Cadillac, to lead its design studio.
United Airlines Inc said on Monday it expects to generate positive adjusted pre-tax income in July, as bookings pick up as a result of rising COVID-19 vaccination rates. The carrier said July will be the first month with positive adjusted pre-tax income since January 2020, when the coronavirus crisis started hurting air travel.
Earnings include: High Tide Inc.
(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for June.
With files from Reuters