The US stock market saw a dip in the trading session on Monday (27/2), moving away from the record levels set the previous Friday. This was amid investors eagerly awaiting crucial inflation data scheduled for release this week. Crude oil prices experienced an increase due to concerns about disruptions in maritime transportation from the Middle East, while the price of Bitcoin reached its highest level in over 2 years.
Market Update: S&P 500, Nasdaq, and Dow Jones Retreat from Record Levels
By closing, the S&P 500 index declined by 0.38% to 5,069.53 points. The Nasdaq index dropped by 0.13% to 15,976.25 points, and the Dow Jones index slipped by 62.3 points, equivalent to a 0.16% decrease, closing at 39,069.23 points.
The cause of the downward pressure on stock prices on Wall Street in this session was the rise in yields on U.S. government bonds, driven by expectations that the Federal Reserve (Fed) will maintain higher interest rates for a prolonged period. The yield on the 10-year U.S. Treasury bond closed the session at 4.299%, marking an increase of about 3 basis points compared to the previous week’s close.
Entering a new trading week, the market had set records the prior week, fueled by impressive business results from chip manufacturer Nvidia, which is at the center of the artificial intelligence (AI) boom. Both the S&P 500 and Dow Jones closed at all-time highs last Friday.
Investors are closely monitoring whether the momentum driven by AI can be sustained, while risks related to economic growth and inflation continue to cast a shadow over the market. Therefore, the report on the Core Personal Consumption Expenditures (PCE) index – the Fed’s preferred inflation gauge – scheduled for release on Thursday this week, is of particular interest to investors.
Alex McGrath, Chief Investment Officer of NorthEnd Private Wealth, suggests that the current upward trend in US stocks, relying on AI stocks, seems quite sustainable.
“The expectations for Nvidia and other semiconductor component manufacturers seem to have brought confidence that AI will continue to drive the market’s upward trend”, McGrath stated.
According to Oppenheimer’s Chief Investment Strategist, John Stoltzfus, investors’ enthusiasm for stocks has increased due to better-than-expected financial reporting season. This optimistic sentiment is maintained “even as the market must contemplate whether the Fed will remain vigilant about the persistence of inflation when considering whether to reduce interest rates this year and if so, when and how much”.
This week, several important U.S. economic data will be released, and some Fed officials will speak on monetary policy. In addition to the PCE report, there are reports on durable goods orders on Tuesday and wholesale inventories on Wednesday. All these figures will help clarify the state of the U.S. economy, helping investors shape interest rate expectations.
Energy Market Jitters: Oil Prices Surge on Middle East Tensions and Supply Risks
In the energy market, Brent crude oil prices traded in London rose by $0.91/barrel, equivalent to a 1.11% increase, closing at $82.53/barrel. WTI crude oil prices traded in New York rose by $1.09/barrel, a 1.43% increase, closing at $77.58/barrel.
Last Saturday, Iranian-backed Houthi rebels in Yemen unsuccessfully attacked an oil tanker flying the U.S. flag in the Red Sea. Last week, another oil tanker was attacked in this area, causing the crew to abandon ship and leading to an oil spill.
The risk of disrupting the oil supply from the Middle East ‘is what is haunting the market,’ said John Kilduff, fund manager at Again Capital LLC, to Reuters.
Oil prices have fluctuated in the $70-90/barrel range since November last year, as pressure from concerns about the increase in U.S. oil supply and weakening oil demand in China conflicted with the price pressure from the wars in Ukraine and Gaza.
Cryptocurrency Surge: Bitcoin’s Rally Fueled by Upcoming Halving and ETF Excitement
Bitcoin prices reached $54,965 during Monday’s session, the highest since December 2021 – according to data from Coin Metrics. After this increase, the virtual currency’s price fluctuated around $54,500. Before this surge, the price of bitcoin had been relatively stable around $52,000 for about a month.
Since the beginning of this month, the price of bitcoin has risen by 27%. The world’s largest virtual currency is still supported by the upcoming bitcoin halving in April and investor enthusiasm for newly established bitcoin exchange-traded funds (ETFs) in the U.S. earlier this year.
In a recent report, JPMorgan Chase bank’s expert Nikolaos Panigirtzoglou noted that after a hesitant period in January, retail investors have become more enthusiastic about virtual currency in February. He believes there are three main catalysts explaining the increased interest of individual investors in virtual currency, including the upcoming bitcoin halving, the upcoming technical upgrade of the ether, and the possibility that U.S. regulators will soon allow the establishment of ether ETFs.
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