A considerable increase in shares of tech companies attracted bulls back to the stock market as inflation worries subdued. Bitcoin is slowly recovering from the collapse at the end of last week.
All 11 sectors of the S&P 500 managed to rise, but the Nasdaq 100 outperformed major stock benchmarks on the back of huge gains of tech giants such as Apple Inc., Amazon.com Inc., and Alphabet Inc., Google's parent company. The number one cryptocurrency soared after falling by 18 % on Sunday. Prices on some non-ferrous metals decreased. Prices on iron ore and steel dropped as China tried to limit soaring commodity prices.
While some analysts have warned that it may be too early to talk about inflationary risks, weaker-than-expected economic reports have helped abated investor concerns. Data from the Federal Reserve Bank of Chicago on Monday showed that US economic activity slowed in April. 10-year breakeven inflation rate, a market indicator of inflation expectations over the next decade, has fluctuated after the highest weekly decline since September
"Inflation fears will remain a headwind for stocks until it becomes clear that any potential price pressures won't last long. Until then, expect a more volatile market," he wrote in a note to clients. "But at this point, strong policy support for stocks remains very much in place, and that's a good thing," he said.
Meanwhile, Lael Brainard, a member of the Board of Governors of the Federal Reserve System, said on Monday that she expects inflation to rise as the US economy recovers from the pandemic. She downplayed the risk that this potential increase would lead to a constant rise of inflation. Minutes from the April Fed meeting showed that last week some officials were open to discussions at "upcoming meetings" about reduction of bond- buying program.
"The Fed continues its wait-and-see posture, which added wind beneath the tech sector's wings," said Chris Larkin, managing director of trading and investing product at E*Trade Financial. "Stocks head into the final full week of the month trying to break a two-week bull-bear stalemate."
This week, the economic calendar nuclides the following important events:
- until May 27, CoinDesk brings prominent crypto voices together to discuss NFTs, exchanges, and the role of central banks. Fed Governor Lael Brainard and Bridgewater founder Ray Dalio will participate in this event;
- On Wednesday, the Reserve Bank of New Zealand will announce its policy decision;
- On Wednesday, the heads of major US banks, including JPMorgan and Goldman Sachs will testify before lawmakers in the Senate Banking and House Financial Services committees of the House of Representatives;
- on Thursday, data on initial jobless claims, GDP, durable goods, pending home sales in the US will be released;
- on Thursday, the Bank of Korea will announce its interest rate decision.
As a result, as of 10:45 New York time (17:44 Moscow time), the S&P 500 index showed an increase of 1.1%.
