Daily market review

US rallies on Fed minutes; Europe up; Asia mixed

United States

US stocks ended near their highs Wednesday, reacting favorably to Federal Reserve minutes posted at mid-afternoon. The Dow rose 0.6 percent, the S&P 1.0 percent and the NASDAQ 1.5 percent.

Though wage pressures are generally seen remaining elevated, the minutes of the May 3-4 policy meeting noted that some members of the Federal Open Market Committee said overall price pressures "may no longer be worsening." Also positive is what was not mentioned in the minutes: the risk that rate hikes could increase from 50 to 75 basis points.

The market edged higher in early trade boosted by a rally among retailers, which since last week's rout in big-box chain Target had been the center of weakness. Dick's Sporting Goods cut guidance and opened sharply lower but then rallied sharply for a 9.7 percent gain on the session.

High-end department store chain Nordstrom rose 14.0 percent after, in contrast to other retailers, raising guidance.

Wendy's jumped 9.8 percent after the burger chain's biggest shareholder, Trian Fund Management, said it may make a bid for the company. Kohl's rose 11.9 percent on a report that bids for the big-box chain are being revised higher.

Home builder Toll Brothers stock rose 7.8 percent after beating estimates and saying demand for its homes remains solid despite high mortgage rates.

The Mortgage Bankers Associations reported yet another decline in weekly mortgage data signaling a likely downturn in the pace of total applications. Yet purchase applications did rise slightly suggesting that, however moderate, there is still buying activity. Other economic data included a 0.4 percent rise in durable goods orders for April, a gain of moderate strength confirmed by a 0.3 percent rise in orders for core capital goods.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$0.88 to US$114.44 while spot gold fell US$12.19 to US$1,854.26. The US dollar rose vs. major currencies. The US Treasury 30-year bond yield was unchanged at 2.98 percent and the 10-year note yield was also unchanged at 2.76 percent.

Europe

European shares posted gains Wednesday, helped by modest strength in Asia and early strength on Wall Street. France's CAC rose 0.7 percent and Germany's DAX posted a 0.6 percent gain.

Germany's GfK survey suggests consumer sentiment will hold steady in June. The report's climate indicator edged up to minus 26.0, still very weak but up from minus 26.6 in May. While offering some hope that deterioration in consumer morale may be over, the latest results nevertheless suggest that households are still very cautious.

The UK FTSE rose 0.5 percent despite new troubles in parliament, including from the Tory party, following the publication of Sue Gray's report and Boris Johnson's handling of the Covid party-gate events.

In the UK, power company SSE plc rose 5.8 percent on strong earnings and retailer Marks & Spencer rose 4.8 percent despite voicing caution on the full year outlook. Swedish medical equipment maker Elekta gained 3.0 percent, also on strong earnings.

Asia Pacific

Stocks were mixed Wednesday, showing resilience following Tuesday's losses among US social media shares. China's Shanghai index rose 1.2 percent to cut in half the prior session's 2.4 percent drop. Japan's Nikkei 225 fell 0.3 percent while Australia's All Ordinaries gained 0.3 percent, both showing little reaction to a hawkish policy announcement from the Reserve Bank of New Zealand.

The RBNZ not only raised its policy rate by 50 basis points but also said it may raise rates above the neutral level in order to bring inflation back within its 1 to 3 percent target range. The 50-point move is the second in a row and follows 25-point moves at their three prior meetings. The bank underscored its confidence in the New Zealand economy, including the strength of the labor market, which it said gives them the scope to focus on inflation. New Zealand's NZX 50 fell 0.7 percent.

Singapore revised up March-quarter GDP by 3 tenths, to 0.7 percent growth compared to the prior quarter, when quarterly growth, however, was much stronger, at 2.3 percent. Public health restrictions were relatively tight early in the year before easing in March. The Strait Times index slipped 0.5 percent.

Looking ahead*

The Bank of Korea opens Thursday's session amid expectations for another 25-basis-point rate hike. Asian economic reports will include Australian capital expenditures, industrial production from Singapore, and merchandise trade from Hong Kong. Business and consumer confidence will be posted in Italy. In North America, Canada will post retail sales, and in the US, the second estimate for first-quarter GDP, weekly jobless claims, pending home sales, and the Kansas City Fed manufacturing index will be posted.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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