US and European stock futures are trading more or less flat as investors adopt some caution after stock indices reached another record high last week. The bulls propelled the S&P 500 index to a record close on Friday, pushing the index to its best week since February.
The stock market indices jumped as concerns over rising inflation were mitigated and after the government struck an infrastructure deal on Thursday.
The stock market surge came after the Commerce Department announced that its inflation indicator increased to 3.4% in May, the fastest increase since the 1990s. However, the actual increase in inflation was less than what economists predicted. This supports the Federal Reserve’s view that inflation is likely to be temporary and is currently under control.
The Dow Jones Industrial Average boosted by 0.69%, while the S&P 500 index increased by 0.33%. The Nasdaq, a tech-savvy index, fell 0.06%, while the Russell 2000, a small-cap index, rose 0.03%.
The bullish momentum in the stock markets was bolstered last week by President Biden’s announcement of a $1 trillion infrastructure deal. The President was successful in gaining Republican Party support for the agreement, which will be used to upgrade broadband coverage, roads, and bridges over the next eight years.
Although the deal is below the initial $2.3 trillion plan broadcasted earlier in March, investors should understand that, the announcement supported positive sentiment in the markets as investors were likely to wonder about the prospects of added spending by the government during the next few years.
June Jobs Report
Remember that on Friday, the Labor Department will release its June jobs report. Nonfarm payrolls increased by 559,000 this month, and economists expect the figure to reach 683,000 in June. Although the anticipated increase in the number of jobs is a positive sign, it will still be far less than the one million predicted by many experts during the US’s recovery from the coronavirus pandemic.
Stock traders should be on the lookout for any signs of wage inflation as employers struggle to fill vacancies and unemployment benefits are phased out in some areas of the country.
Investors should note that the stock price of the sports giant jumped 15% after it outperformed earnings expectations. The company posted earnings of 93 cents per share versus the 51 cents per share forecasted. The firm’s sales increased to $5.4 billion, rising by 141% in Northern America and sales in China grew by 9%.
Bitcoin and Binance
Bitcoin price hasn’t been influenced by the FCA news which came out over the weekend. Basically, the FCA has banned the Binance’s unregulated activity in the UK and the exchange has until Wednesday to wind down its operations. Traders are looking at this particular event more positively and this is because more and more exchanges will begin to work within the guidelines of the regulators. This will only encourage more institutional involvement.
We have a clear evidence that institutional investors are getting involved in the space even further as regulators are pushing the existing crypto platforms to work in a safe manner. For instance, Andreessen Horowitz, a private venture capital firm, is launching a fund of $2.2 billion fund to invest in the crypto market. It intends to invest in block chain startups such as Dapper Labs and OpeanSea.
Consumer spending in the United States remained unchanged in May, while inflation fell short of economists’ expectations. The dollar fell last week as Federal Reserve officials expressed opposing views on whether the recent rise in inflation was temporary. On Friday, the dollar index fell 0.26%.
The price of gold has been very much moving in a side way pattern after the massive drop that happened on the back of the hawkish comments from the Fed meeting. However, the fact that inflation data confirmed that the Fed may not be taking any aggressive stance towards their monetary policy should lend a helping hand to gold bulls. The most important event for the gold bulls this week will be the US NFP data as that is more likely to move the gold price.
The prices of oil have posted weekly gains for the last four weeks in a row. The rally is supported by the belief that demand will outstrip supply, as OPEC+ will monitor and control supply beginning in August in order to raise prices. Furthermore, the likelihood of sanctions being lifted against Iran is diminishing, and thus the supply of additional oil is unlikely. President Biden’s infrastructure deal also aided the rise in oil prices, as traders anticipated increased demand for energy.
Brent crude is currently trading at $75.74 per barrel, up 0.2%, while WTI crude in the United States is trading at $73.59 per barrel, up 0.4%.
Hedge funds join retail investors
Since the beginning of the year, the most significant hurdles to hedge fund performance in the United States have been the rise of meme stocks and retail investing. The emergence of the coronavirus pandemic has made it “logical” for managers at large funds to bet against companies with weak fundamentals, hoping to profit from their short positions. They did not, however, anticipate the rise of retail investing. The stock prices of companies such as GameStop and AMC have risen solely as a result of the hype generated on social media platforms such as Reddit. Hedge funds lost more than $12 billion as a result of this.
These funds are now considering investing in meme stocks and profiting from the phenomenon. Managers are developing strategies to identify which meme stocks are likely to rise next by monitoring discussions on various social media platforms and detecting coordinated purchasing. The volatility of retail investing has reached a point where hedge funds can no longer dismiss it as random and insignificant.