Stocks Trade in Narrow Range
Despite a culmination of highly anticipated market-moving events last week, US equities were little changed for much of the week. During the first four trading days last week, the S&P 500 fluctuated within a ten-point range, or about 0.40%, which is extremely narrow.
The Nasdaq 100, however, continued to blaze a new trail into uncharted territory by making new all-time highs throughout the week before finally taking a steep dive during Friday’s trading.
Many market participant ants were expecting Thursday to be one of the most volatile trading days of the year due to the combination of political events taking place. However, the result was less dramatic than expected for equity markets around the world.
Former FBI director James Comey’s testimony before the Senate seemed to have a negligible impact on the equity market, despite the hyped-up anticipation. Investors from across the world tuned in to watch Comey’s live testimony looking for any clues as to what happened in private meetings with President Trump. And despite all the anticipation and viewership, US stocks were marginally higher without much volatility or rapid, knee-jerk movements.
Similarly, the UK election seemed to be somewhat of a non-event as well for US equities. For European equities, The FTSE 100 only fell 0.40% during polling and ended up finishing about 1% higher after the election. What came as a bit of a surprise, current Prime Minister Theresa May lost 12 seats in Parliament, resulting in what is called a “hung Parliament.”
“From a market perspective, a hung Parliament is seen as one of the worst possible outcomes to this election, because it just injects further uncertainty into the United Kingdom as it heads into Brexit negotiations with the European Union,” wrote Jameel Ahmad, vice president of market research at FXTM.
Before the election, however, analysts at FXTM noted how traders were heavily betting on a landslide victory for Theresa May and her party. With Brexit talks just around the corner, this election outcome unequivocally complicates the global political environment.
To cap off an already lackluster week, shares of technology companies dramatically declined on Friday, putting the Nasdaq 100 off more than 3% at one point. The stark sell-off was led by the largest company in the world by market capitalization, Apple Inc. Analysts chalked last week’s sell-off to “profit-taking” after an enormously strong year-to-date rally in technology companies. There was no concrete news that seemed to instigate the severe sell-off.
In the precious metals market, gold made a new year-to-date high of $1298.8, stopping just shy of the $1,300 level on Tuesday of last week. Gold has since declined but is showing signs of strong support well above $1,250. When the United Kingdom decided to leave the European Union last year, the event dubbed “Brexit”, gold soared to new highs. Given that the UK election resulted in a hung parliament, it seems reasonable to see further upside in gold given the increased uncertainty.
In the days ahead, traders have their eyes on a two-day Fed policy meeting starting on June 14th. Fed fund futures traded on the CME showed a 95.8% probability of an interest rate increase.