Key Points:
- On Tuesday (9th May), U.S. stocks finished the day with a decline as investors awaited the release of the consumer price index on Wednesday (10th May). Similarly, European markets mostly closed lower, with the Stoxx 600 experiencing a 0.3% drop due to a 1.2% decline in tech stocks.
- On Tuesday, President Joe Biden held discussions with senior lawmakers regarding the U.S. debt ceiling. However, House Speaker Kevin McCarthy stated that there was no significant progress towards reaching an agreement. McCarthy also mentioned that he would meet with Biden and other leaders of the party again on Friday (12th May).
- Following a warning from Airbnb that it was expecting a challenging second quarter, due to indications that consumers are cutting down their travel, the company's shares declined by 11.2% in after-hours trading. Nevertheless, Airbnb's financial results for the first quarter showed a net income of $117 million, a significant improvement from a loss of $19 million in the same period the previous year.
- Skipton Building Society has introduced a new mortgage scheme in the UK, allowing first-time homebuyers to borrow the entire value of a property without a deposit. This plan marks the first time since 2008 that a 100% mortgage loan has been made available to customers.
- According to economists, the U.S. consumer price index (CPI) is anticipated to show a continuing rise in prices, mainly driven by an expected recovery in the prices of used cars. If inflation remains persistently high, it could increase pressure on the Federal Reserve to maintain the current interest rates.
The Bottom Line-
On Tuesday(May 9th), the investors' reluctance to make significant moves was evident in the low trading volume.
The SPDR S&P 500 ETF Trust, which follows the S&P, had a trade volume of 44 million shares, which was lower than the 30-day average of 76.1 million. The major stock indexes experienced marginal declines, with the S&P 500 decreasing by 0.46%, the Dow Jones Industrial Average remaining mostly unchanged, and the Nasdaq Composite falling by 0.6%.
It was a relief for regional banks that faced a week of unpredictable price fluctuations. Although the SPDR S&P Regional Banking ETF declined by 0.4%, PacWest, the troubled bank in Los Angeles, managed to achieve a slight increase of 2.35%.
During the after-hours trading session, several companies released their earnings reports, leading to significant price swings. Airbnb and Twilio both experienced substantial declines, with Airbnb falling by 11.2% and Twilio by 14.7%, after their second-quarter forecasts failed to meet expectations. However, Rivian, the electric vehicle maker, saw a 6.4% increase in its stock price after its net loss for the period was lower than expected by analysts.
Investors are optimistic that the consumer price index (CPI) for April will indicate a decrease in prices. However, there are indications that inflation may not decline as rapidly as desired. According to economists, the headline CPI figure for April is likely to remain the same as that of March. The robust performance of the labor market in April could also contribute to price pressures. New York Fed President John Williams has stated that he does not expect inflation to fall to 2% until the next two years, indicating a potentially turbulent future for both the economy and markets.
