U.S. Indexes closed higher on Tuesday, with the Russell 2000 outperforming as it rebounded from Monday’s losses, while the S&P 500 and NASDAQ also posted modest gains. Sector performance was broadly positive, with Utilities and Energy leading the advance. Communication Services was the clear laggard, weighed down by Alphabet (GOOGL, -4%) after it announced plans to raise USD 80 billion for AI infrastructure. Elsewhere, Marvell (MRVL) surged after Nvidia CEO Huang suggested it could become the next trillion-dollar company, while Hewlett Packard Enterprise (HPE) rallied following a strong earnings report. Crude prices moved higher amid mixed geopolitical reporting. The headline that appeared to drive the session came from Fars News, which reported that communications between Iran and the US aimed at reaching an initial memorandum of understanding had been suspended for several days. However, later reporting was more constructive, with a senior Iranian political source telling Amwaj Media that communications via intermediaries had not ceased. President Trump later echoed that view, dismissing reports of a breakdown in talks as “fake news”. Treasuries flattened as higher oil prices weighed on the front-end, while stronger-than-expected JOLTS data only briefly supported higher yields before the move faded. The Dollar was mixed against G10 peers. The Australian Dollar outperformed, supported by higher metals prices, while the Japanese Yen lagged as USD/JPY reached 159.99, edging ever closer to levels markets associate with potential intervention. ING analysts note the intervention threshold may now be higher than the 160.60 area seen in April, potentially closer to 162-163, although they still view intervention risks as underpriced. On the data front, JOLTS job openings surged to 7.618 million from 6.866 million, well above the 6.82 million forecast. Fed’s Hammack also reinforced a hawkish tone, saying it remains reasonable to keep rates steady given uncertainty, but warning the Fed may need to act “soon” if inflation does not continue to cool. Looking ahead, the main focus for markets remains Friday’s US nonfarm payrolls report. Hammack, the Cleveland Fed president, one of the dissenters who voted to remove the easing bias from the Fed’s statement, said that it is reasonable to keep rates steady for now, given uncertainties. Hammack added that the Fed may need to act soon if inflation trends do not cool. She warned that there are risks to waiting for signs that high inflation is becoming embedded in the economy, and her main concern is a growing risk of persistent inflation pressures. We are not yet seeing signs that inflation expectations are rising. She is also worried that monetary policy may not be tight enough to lower inflation. Hammack continues to put her focus on the inflation side of the mandate, noting she is firmly committed to getting inflation back to the 2% target. She added that the economy is facing a broadening array of factors that are driving up inflation, noting how sharp energy shocks are hard for monetary policy to deal with. On the labour market, she said data points to stability and that the unemployment rate is around full employment levels. Job openings surged to 7.618 million in April from 6.866 million, well above the 6.82 million forecast and the highest level in two years. The vacancy rate rose to 4.6% from 4.2%, while the quits rate eased to 1.9% from 2.0%. Despite the strong headline, Oxford Economics cautions that the report likely overstates labour market strength as the increase in openings did not translate into a higher hiring rate. The consultancy notes that much of the increase was concentrated in a single sector, professional and business services. Oxford writes that “for now, the labour market remains mostly stable”, noting that with both the quits rate and layoff rate edging lower, neither employees nor employers appear in a hurry to make major moves. The desk notes that overall, the report points to a labour market that remains stable rather than one that is reaccelerating sharply. Elsewhere, Oil closed higher by 1.75% while Gold was flat.
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