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Such a rotation among stocks could actually be a healthy sign for the market, as long as it can stay close to its records. Market watchers have been worried to see just Nvidia and a handful of other companies responsible for much of the S&P 500’s returns recently. They would prefer a market where many stocks are participating in the gains.
RXO jumped 23 per cent after it agreed to buy the Coyote Logistics freight brokerage business from UPS for nearly $US1.03 billion ($1.55 billion). RXO said the deal will make it North America’s third-largest provider of brokered transportation. UPS, which bought Coyote in 2015 for $US1.8 billion, rose 1.5 per cent.
Under Armour swung from an early loss to a gain of 2 per cent after saying it agreed to pay $US434 million to settle charges raised by shareholders related to its accounting and sales practices. The shoe and athletic wear company denied any wrongdoing in the settlement, but it also agreed to separate the roles of chairman and CEO for at least three years.
In the bond market, Treasury yields eased a bit. The yield on the 10-year Treasury fell to 4.23 per cent from 4.26 per cent late Friday.
It’s been mostly falling since topping 4.70 per cent in late April, which has relaxed the pressure on the stock market. Yields have sunk on hopes that inflation is slowing enough to convince the Federal Reserve to cut its main interest rate later this year.
The Fed has been keeping the federal funds rate at the highest level in more than 20 years, hoping to grind down on the economy just enough to get inflation under control.
Fed officials may be underappreciating just how much the US economy is slowing, according to economists at UBS led by Abigail Watt. They see growth slowing to below a 2 per cent annualised rate in the first half of 2024, down from 3.1 per cent growth in the fourth quarter of 2023 from a year earlier.
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The UBS economists say US households in the bottom 40 per cent of the country for income are burning through their savings after depleting the cushions they had built through the pandemic. That could further slow retail sales, which have been up and down as companies highlight how lower-income customers are often struggling to keep up.
Wall Street is actually hoping for a slowdown in the economy, one that will take upward pressure off inflation and push the Federal Reserve to cut rates. Goldman Sachs economist David Mericle said a rate cut could happen as soon as September if inflation reports like the one coming up on Friday turn out as expected.
The Fed just needs to make sure it cuts interest rates at the right time. If it waits too long, the economy’s slowdown could careen into a recession. If it’s too early, inflation could reaccelerate.
In stock markets abroad, indexes rose across much of Europe after mostly falling in Asia.
AP
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