The Dow Jones Industrial Average erased earlier losses as a rally in tech stocks offset dollar pressure.
The Dow gained 14 points, or 0.1%. The S&P 500 rose 0.6% and the Nasdaq Composite rose 1.4%.
Consumer discretionary and information technology supported stocks, up 1.3% and 0.8%, respectively. Casino shares outperformed after news that China would allow tour groups to Macau for the first time in nearly three years. Wynn Resorts jumped 12.4% and Las Vegas Sands rose 11%. Tech stocks Enphase Energy and Salesforce rose 2.3% and 1.9%.
The British pound dropped to an all time high Monday against the US dollar. The British pound at one point fell 4% to an all-time low of $1.0382. The Federal Reserve’s aggressive bullish campaign, coupled with the UK tax cuts announced last week, pushed the US dollar higher. The euro has hit its lowest level against the dollar since 2002. A rise in the greenback can hurt the profits of US multinationals and also wreak havoc on global trade, much of which is traded in dollars.
“Such strength in the US dollar has historically led to some sort of financial/economic crisis,” Michael Wilson, Morgan Stanley’s chief US equity strategist, wrote in a note. “If there was a time to be on the lookout for something to break, this would be it.”
Traders will be watching the S&P 500 closely on Monday for any break below its bear market low. The S&P’s lowest close for the year in June was 3,666.77. It closed Friday at 3,693.23 after briefly trading below that level. The benchmark’s intraday low for the year is 3,636.87. Any trading below these levels could lead to more selling in the market.
Stocks ended a brutal week with the blue-chip Dow on Friday finding a new intraday low for the year and closed down 486 points. The broad-market S&P 500 temporarily broke below its June closing low and ended down 1.7%. The tech-heavy Nasdaq Composite lost 1.8%.
Another high-profile rate hike by the Federal Reserve last week was the catalyst for the markets’ latest leg down. The central bank has indicated that it may raise rates to as high as 4.6% before pulling out. Forecasts also show that the Fed plans to be aggressive this year, raising rates to 4.4% before the end of 2022.
Bond yields climbed after the Fed decreed another rate hike of 75 basis points. Yields on 2- and 10-year Treasury bills hit highs not seen in more than a decade. Friday, Goldman Sachs reduced its end-of-year target for the S&P 500 at 3,600 from 4,300.
Rates jumped again on Monday, with the 2-year Treasury bill rising above 4.29% at one point in the day.