In this daily market update, we dive into the recent performance of key indices and commodities. The Standard & Poor’s 500 index achieved a fresh 2023 high last week, climbing 1.6%. This surge was driven by optimistic expectations surrounding the U.S. Congress reaching an agreement on the debt ceiling. However, hopes wavered when Republican negotiators suspended talks, citing uncooperativeness from the White House. This development cast a shadow on the market, leading to a fractional decline in the S&P 500. Alongside this, the Dow Jones Industrial Average and the Nasdaq Composite also experienced slight declines. Let’s explore the details further.
S&P 500 Performance and Debt Ceiling Concerns:
The S&P 500 reached an intraday high of 4,212.91, marking its peak for the year. Nevertheless, the index closed Friday’s session down by 0.1% due to renewed concerns about the debt ceiling following the pause in negotiations. This pause raised uncertainties among market participants, as they had grown more optimistic after House Speaker Kevin McCarthy suggested that a House of Representatives vote on a debt ceiling deal might be imminent. However, the surprise came from Federal Reserve Chair Jerome Powell, who stated that the Fed would now assess decisions “meeting by meeting,” while also emphasizing the need for careful evaluation of rate hikes and their impact on the economic outlook.
Dollar’s Response to Powell’s Remarks:
Powell’s remarks had a significant impact on the U.S. dollar. Following his statement, the dollar experienced a decline, compounded by the pause in debt ceiling negotiations. The Dollar Index, which measures the dollar’s performance against other major currencies, fell 0.4% to 103.08, retracting from a seven-week peak reached on the previous Thursday. Despite the dip, the dollar managed to secure a weekly gain of 0.6%.
The USD/JPY pair slid 0.7% to 137.76, despite hitting a six-month high of 138.745 earlier in the week. This currency pair registered its largest weekly percentage gain since mid-February, climbing by 1.7%. Conversely, EUR/USD rose by 0.3% to 1.0806, albeit experiencing a weekly loss of 0.8%.
Crude oil prices faced volatility last week, initially rising but ultimately ending lower on Friday due to the impasse in debt ceiling talks. However, crude oil managed to break its four-week losing streak, achieving a modest weekly rise between Monday and Wednesday. West Texas Intermediate (WTI) crude settled down 0.5% at $71.55 per barrel, with a weekly increase of approximately 2%. London-traded Brent crude, the global benchmark, closed down 0.4% at $75.58. Despite the decline, Brent saw a weekly gain of 2% following four consecutive weeks of losses amounting to 14%.
Star Performer in Energy Markets: U.S. Natural Gas Futures:
U.S. natural gas futures outshone other energy commodities, reaching a near nine-week high on Friday. The prior session saw a technical rebound, while lower gas exports from Canada, resulting from wildfires, provided additional support. The front-month gas futures for June delivery on the New York Mercantile Exchange (NYMEX) settled at $2.585 per million British thermal units (mmBtu), marking a modest decline of 0.3% or 0.7 cents. However, on Thursday, the contract experienced a significant surge of approximately 10%, settling at its highest level since March 13.
Gold Market Rebound:
The breakdown in talks to raise the U.S. debt ceiling in Washington triggered a decline in the U.S. dollar on Friday, leading to a rebound in the gold market. For the first time in five sessions, alternative safe havens, particularly gold, rallied. Despite this positive turn, gold bulls faced a challenging week as they nearly lost the upward momentum experienced earlier in the month, which resulted in record-high prices. On Friday, June gold futures settled at $1,981.60 per ounce, reflecting a 1.1% increase for the day. However, earlier in the week, the front-month gold futures contract dipped to as low as $1,954.40 per ounce after reaching an all-time high of $2,085.40 per ounce on May 4. Overall, June gold futures experienced a weekly decline of 2%. Spot gold closed at $1,954.12 per ounce on Friday, indicating a 1.3% increase for the day. Despite the daily gain, spot gold experienced a weekly decrease of 1.5%.
Bitcoin (BTC) displayed a 1.78% increase last week, reaching a trading value of approximately $27,000. Since April 19, BTC has been trading below the $30,000 mark. However, the cryptocurrency faced a slight setback this morning, slipping below $27,000 to $26,600. On the other hand, Ether (ETH) exhibited a positive performance, rising 2.44% over the week to reach $1,816. Although Ether experienced several instances of falling below $1,800 during the week, it is once again trading below that threshold in early Asia trading today.