Stock Rally Fades As Dollar, Treasury Yields Move Higher: What's Driving Markets Friday

The stock market rise came to a halt on Friday, with all three main U.S. averages trading sideways for the day, as Treasury yields and the dollar gained in response to hawkish Fed remarks and a stronger-than-expected University of Michigan consumer sentiment index readout.

Fed Governor Christopher Waller said it is disturbing that core inflation is not moving, which will probably require some more tightening. Richmond Fed President Thomas Barkin said he is open to more rate hikes if warranted by data. This was enough to quell some market risk appetite and generate upward pressure in Treasury yields.

Cues From Friday's Trading:

The S&P 500, the Nasdaq 100 and the Dow Jones Industrial all ticked marginally up, while small cap stocks in the Russell 2000 index underperformed, falling 0.8% for the session.

U.S. Indices’ Performance on Friday

Friday Trading In Major US Equity ETFs: In midday trading on Friday, the SPDR S&P 500 ETF Trust SPY was 0.1% lower to $441.80, the SPDR Dow Jones Industrial Average ETF DIA was flat at $344.37 and the Invesco QQQ Trust QQQ was 0.1% higher to $370.68, according to Benzinga Pro data.

Defensive outperformed cyclical sectors, while value outperformed growth.

The Utilities Select Sector SPDR Fund XLU was the top performer for the day, up 1.1%, followed by the Consumer Staples Select Sector SPDR Fund XLP, up 0.6%.

Latest Economic Data:

The University of Michigan's preliminary consumer sentiment index revealed a higher-than-expected increase in June. The overall index came in at 63.9, up from 59.2 in May and above expectations of 60. Year-ahead inflation expectations tumbled from 4.2% to 3.3%, the lowest since March 2021.

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Stocks In Focus:

• Shares of Virgin Galactic Holdings, Inc. SPCE rallied 14%, considerably slowing from a 45% rally in the premarket. The market questioned the ability of the Richard Branson-led company’s to launch the first commercial spaceflights in the immediate future.
• Newly public CAVA Group, Inc. CAVA plummeted 15% on his second trading day.
• WeWork Inc., WE rose 20% and is on track for its fourth straight session of gains.
• iRobot Corp. IRBT spiked 20%, on pace for the largest gain since January 2021, as the UK’s antitrust regulator issued the greenlight on Amazon.com‘s AMZN $1.7 billion pending acquisition of iRobot.
• Among small-cap EV players, Lordstown Motors Corp. RIDE surged 18%.

Commodities, Bonds, Other Global Equity Markets:

Crude oil ticked 0.4% higher, with a barrel of WTI-grade crude trading at $71. The United States Oil Fund ETF USO was 0.5% higher to $63.73 per share.  

Treasury yields rose, with the 10-year yield up by 6 basis points to 3.78% and the two-year yield up by 9 basis points to 4.74%. The iShares 20+ Year Treasury Bond ETF TLT was 0.4% lower for the day. 

The dollar gained, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.3%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.1% lower to 1.0930.

European indices traded higher across the board. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 0.5%, reaching its highest levels since January 2022.  

Gold held steady at $1,954/oz. The SPDR Gold Trust GLD was slightly lower by 0.2% to $181.8. Silver rose 0.7% to $24, with the iShares Silver Trust SLV up 0.5% to $22. Bitcoin BTC/USD was 1.4% higher to $25,919.

Staff writer Piero Cingari updated this report midday Friday. 

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