NASDAQ 100, Dow Jones, S&P 500: Fed Tightening, Pfizer’s Drug Drop Dampen Wall Street Mood

Highlights

• Fed tightening and Pfizer’s drug discontinuation affect Wall Street mood.
• Geopolitical concerns and Fed testimony shape market sentiment.
• Tech stocks experience setbacks amid anticipation of a rate hike.

Overview

Investor concerns over the Fed’s aggressive monetary tightening and Pfizer’s decision to drop a weight loss drug have dampened the mood on Wall Street. This is signaling a potentially muted open on Monday. The fear is that the Fed’s tightening measures could negatively impact the U.S. economy. Additionally, a failed revolt by Russian mercenaries over the weekend has raised geopolitical uncertainties, heightening worries about the stability of President Vladimir Putin and the potential disruption to Russian oil supply.

Powell’s Hawkish Tone Lingers

Last week, the recent rally in U.S. stocks faltered following Fed Chair Jerome Powell’s testimony, which indicated more interest rate hikes in the future. While most policymakers foresee at least two quarter-point rate increases by year-end, traders anticipate only one hike in July, with expectations of the central bank maintaining steady rates through the end of 2023, according to CME Group’s Fedwatch tool.

July Rate Hike Expectations Weigh

Investor sentiment is currently tied to the assumption of an upcoming rate hike at the end of the next month. The market will closely monitor upcoming data, particularly on the labor market and inflation, as these factors will significantly influence investor behavior.

S&P, Nasdaq Break Winning Streaks

Both the tech-heavy Nasdaq and the benchmark S&P 500 experienced setbacks last week, breaking their winning streaks. The Nasdaq ended its eight-week run, its longest since March 2019, while the S&P 500 concluded its five-week rally, its longest since November 2021.

VIX Rising on Investor Anxiety

Investors remain concerned that the Fed may overdo its tightening measures, which has led to an increase in the CBOE Market Volatility index, a gauge of investor anxiety, reaching its highest levels in nearly a week, up 0.90 points at 14.35.

Pressure Expected from Lower Pfizer Shares

In terms of individual stocks, Pfizer Inc experienced a 2% decline in premarket trading. This followed the company’s announcement of the discontinuation of an experimental obesity and diabetes drug. Meanwhile, Tesla shares slipped 1.9% in the premarket as Goldman Sachs downgraded the electric car maker, citing pricing headwinds. On the other hand, Moderna gained 2.5%. This occurred after receiving an upgrade by UBS to buy from neutral, with UBS emphasizing the potential upside from other vaccines.

Lucid, the EV Maker, Surges Double-Digits

Furthermore, Lucid, the EV maker, witnessed a 12% surge after revealing a partnership with Aston Martin to supply powertrain and battery systems to the British luxury carmaker. Aston Martin will reciprocate by giving Lucid a 3.7% stake in the company and cash payments totaling $232 million.

Walgreens, Nike Earnings This Week

As the final week of June unfolds, the economic reports and corporate earnings calendar appear relatively light. Key highlights include Walgreens Boots Alliance’s earnings on Tuesday and Nike’s earnings on Thursday, capturing the attention of investors.

Economic Data, Powell in Focus

Looking ahead, market participants eagerly await several economic indicators.  These include a key inflation gauge, durable goods data, and the University of Michigan’s consumer sentiment index. Additionally, Powell’s upcoming speech later this week will provide important cues for investors.