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US equity indices dropped for the first time in six days, mostly on slightly weaker prices for Big Tech stocks. All three leading benchmarks ended 0.4% lower on the day after a late session recovery from the day’s low. European and Asian stocks gained ~1% on Tuesday.
Investors focus remains on the US bond market with 30-yr Treasury yields adding 5bp to 4.97%. The short-end of the yield curve was unchanged with 2-yr yields at 3.98%. Markets will be watching the developments in Congress this week regarding the ‘big, beautiful’ tax bill that Trump is pushing to pass. He described it as the biggest tax cut in the history of the country during his visit to Capitol Hill.
In commodity markets, US natural gas was the notable mover with a 10% gain for front-month contracts, reversing Monday’s sell-off despite weather forecasts pointing to lower demand and driven by a supply outage in Norway. (BOE)
On the Fed front, Alberto Musalem, St. Louis Fed president, said tariffs could still cause a "significant" impact even after the US-China trade deal. US tariffs are now about six times higher on average than at the start of the year.
On the business front, Elon Musk said he is reducing his political participation to focus more on Tesla but shares barely moved (WSJ). There were no significant moves among S&P 100 members.
Central Banks: the Reserve Bank of Australia cut its policy rate by 25bp as exp to 3.85%, a two-year low as inflation risks fell significantly with the latest CPI at 2.4% YoY, a four-year low. The RBA signalled further easing and the Aussie dollar was the only major currency to fall against the US dollar (-0.5%). Also, China’s central bank eased policy rates by 10bp to stimulate consumption as the economy softens. (1-yr LPR to 3.0%, 5-yr to 3.50%).
Economics: Canadian headline inflation fell to 1.7% YoY in April from 2.3% the prev month due to lower energy prices and the removal of a carbon tax. The Bank of Canada, which meets next on June 4th, had forecasted an even steeper drop to 1.5%.
Deals: in private markets, insurer Acrisure raised $2.1bn in a funding round led by Bain Capital that valued the company at $32bn, 40% more than its last round 3-yrs ago. (other investors involved BDT & MSD, Fidelity, Apollo and Gallatin Point). (Reuters)
Earnings: Home Depot (mcap $375bn) beat revenue (+9% YoY) but missed net income (-5% YoY to $3.43bn) quarterly estimates. The stock finished marginally lower (-0.6%) as management kept the full-year sales forecast. Those reporting tomorrow include TJX Companies, Lowe’s Companies, Target, Zoom and Best Buy.
See you tomorrow.
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