US stocks edged higher yesterday as shares of industrial and consumer discretionary companies rose, but gains were kept in check by worries of a global slowdown. Continental European stock markets fell even after data showed confidence among German companies improved.
In Ireland, Irish bank shares were mixed after the sell-offs of last week and CRH — which relies on US and European markets for its sales and profits — were little changed on the day. The so-called risk rally has come under scrutiny after stock valuations climbed near levels reached during the height of last year’s euphoria.
While weakening data and a pivot by global central banks away from tighter policy is shaking confidence, a breakthrough in US-China trade talks could provide support going forward. Investors largely shrugged off special counsel Robert Mueller’s report that US President Donald Trump’s campaign did not collude with Russia, despite S&P 500 futures initially rising.
Nonetheless, there were signs of fears about the health of the world economy, as Australia’s 10-year bond yield recorded an all-time low and Japan’s hit the lowest since September 2016. In the US, technology companies led losses in the S&P 500 Index, while consumer and industrial shares advanced. Last week the US bond yield curve inverted as investors bet the US Federal Reserve will need to cut rates as growth slows.
“Earnings and rates drive the markets and we are in a position where the rates are falling and the Fed has basically told you that the economy is slowing down, so you have to be wary of earnings,” said Dave Ellison, portfolio manager at Hennessy Funds in Boston. The Federal Reserve last week decided not to raise interest rates this year in a wholesale shift in its outlook.
“Tech stocks are being hit due to a slowing economy and people don’t want to pay a high price for an industry whose growth is probably slowing,” said Mr Ellison.
Boeing shares rose as the planemaker said it would brief pilots and regulators this week on software and training updates for its 737 Max aircraft.