On Tuesday, Wall Street’s major indexes saw a little upswing as stock-trading markets had a volatile session with investors weighing stronger-than-expected producer prices as well as comments from Federal Reserve Chairman Jerome Powell on the US economy.
Stock trading trends: US Producer prices
Traders had been eyeing US producer prices in April which came in higher than consensus as services and goods saw a substantial increase. This led to greater bullish sentiments and adjusted expectations for a September rate cut.
This quote encapsulates the complexity of the factors driving the trends in stock trading on a day when consumer price figures from the first quarter might signal a trend, or might just have been an aberration.
Stock trading trends: Inflation fears
These inflation fears, however, haven’t dampened the stock trading trends of early in the year.
With the support of stronger-than-expected first quarter earnings and the potential of a Fed rate cut later in the year, all three of the major US indexes still sit near fresh record highs.
With the Dow Jones Industrial Average up 71.74 points, or 0.18%, as of 09:44 a.m. ET, these stock trading trends seem destined to continue.
However, U.S.-listed shares of the Chinese e-commerce giant Alibaba tumbled 6% early into the trading session after the company reported a 86% drop in fourth-quarter profits.
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Shares of On Holding, a Swiss footwear manufacturer whose brands include Saucony, rose 13.7% after the company reported better-than-expected quarterly sales partly fuelled by strong demand for its running shoes.
US president Joe Biden’s announcement of a massive increase in tariffs on Chinese imports roiled stock trading trends for Chinese companies that list in the US.
What’s more, Tesla’s shares gained 3%, helping to lift indexes while GameStop leaped 62.8% on the momentum of Roaring Kitty’s latest post on X.com (the site that helped launch the meme).
Other stocks associated with the 2021 meme rally — including AMC Entertainment and Koss Corp — rose 86% and 33.1%, respectively, to show that the sky’s the limit when it comes to trading volatility on Wall Street.
Stock trading trends remain volatile and unpredictable — and always will.
The factors that briefly buoy indexes can mysteriously bring them down or attract multi-millionaire hedge-fund traders to short-sell a company, as was the case with Gamestop for most of 2021.
When we look to the closing bells, we’re seeing the new American dream unfold before us: the democratisation of the dreaming process itself.
Global brokerages have pushed back the forecasts for the first U.S. Federal Reserve interest rate cut, which have now moved to September from June.
Some have pushed it to December.
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Strong economic reports played a role in pushing back the expected interest rate cut, a tool that trading in stocks is sensitive to.
Inflation figures for last month, employment for March, and PCE were all above the expectations, with the PCE coming into the market on a moderate growth trend, leading to trading in stocks to be readjusted.
The consumer prices index (CPI) set to be released on Wednesday for April is expected to come in at 2.1%, still a healthy figure.
Movements in these economic indicators are reflected in the evolving rate cut expectations from the market, with the CME FedWatch (FOMC predictions) now showing an 8.7% chance of a rate cut in June, down from above 80% – which is a key driver of recent stock trading trends.
Chances of rate cuts would rise to 31.4% in July and 65.7% in September. Thus, stock trading trends are tied into current and future monetary policy expectations.
These are the revised forecasts of the three major brokerages that will form the basis of stock trading trends:
Goldman Sachs now sees the first cut in July, originally forecasted for June.
Other bankers, such as J P Morgan and Jefferies, stick to their July forecast – with mixed confidence in the trading of stocks.
BofA Global Research pushed back its forecast from June to December, expecting a 25 basis-point cut.
Barclays, UBS Global Wealth Management, TD Securities, and Wells Fargo predict a September cut, now a can’t-miss date for stock-trading trend watchers.
RBC Capital Markets, too, has issued its conservative call, forecasting that the stock trades will start on ‘December’ (it used to be June). Macquarie also recently delayed its forecast to December.
HSBC and Morgan Stanley expect a cut in September, with Morgan Stanley forecasting three cuts, totalling 75 basis points.
Citigroup is the most bearish, predicting as early as July, with a total of 100 basis points by year-end.
By comparing the stock trading trends before the CPI data for March and after, we can see persisting differences in brokers’ expectation from the Fed.
The stock trading trends before the March CPI was published point to brokers’ expectations for more aggressive Fed rate cuts, starting as early as June.
Post-CPI, the stock trading trends show more caution, reflecting how economic data and policy expectations explain stock trading trends from the beginning.
In other words, the stock trading trends react to economic news and policy expectations.
Global shares of the retail favourites GameStop (GME.N) and AMC (AMC.N), renewed by posting and tweets by ‘Roaring Kitty’ Keith Gill, surged more than two times on Tuesday, reviving interest in what was at the core of the 2021 meme stock craze.
The return of activity, mirroring the latest trading trends, resulted in the halting of GameStop shares several times within the first hour of trading in New York, with the stock hitting its highest level since June 2021.
This surge could be understood and is in fact in keeping with the best of recent stock trading trends, as Gill’s reappearance on the social trading platform X, where he had been absent for almost three years, sparked renewed interest in such stocks.
The teenager didn’t even explicitly mention a company name.
But two of the most traded stocks by retail investors on Monday, according to J.P. Morgan, were GameStop and AMC.
The CEO of Tuttle Capital Management, Matthew Tuttle, observed: ‘The fact that Roaring Kitty is coming back should be totally meaningless to the stock market [but] the fact that it isn’t is fascinating.’
Social media and individuals still seem to be driving trading trends.
On Monday, shares in GameStop leapt by as much as 118% to a two-year high, sending its market capitalisation soaring and likely prompting large losses for short sellers: the analytics firm Ortex Technologies estimated that the rally cost short sellers $1.8 billion.
All of this was sparked by some of the same trading trends that have dominated stock trading in recent months.
AMC, too, cashed in on the stock-trading enthusiasm of the past week, when it issued a new share sale that raised $250 million, at the same time its stock soared 78% on Monday, while the broader rally also pulled up shares of Koss, BlackBerry and Tupperware by between 35% and 54%.
Robinhood, the investment broker that brought zero-commission trades to hordes of so-called ‘retail’ investors, saw its shares jump 7.5% on similar news.
It affected stock trading trends, but it also tells us something about the increasingly symbiotic nature of platform innovations and fads in stock trading itself.
Though these spikes might have been spectacular while the story dominated headlines, analysts such as Ben Laidler, global market strategist at the multi-asset trading platform eToro, warn that such ‘speculative-induced trades’ – markedly different to the ones that drove the market in 2021 – cannot be supported by the fundamentals.
In this way, too, the story marks a maturation in stock trading trends and the market’s reaction to them.
Chevron. In April, the company replaced electric-car pioneer Tesla to become the most shorted U.S. stock, according to the Hazeltree Shortside Crowdedness Report.
In January, Tesla was numero uno.
Tesla (moving to the side) became the most shorted U.S. stock at the beginning of the year. Now Chevron has taken the top spot.
With energy prices in freefall, short-sellers were loading up on Chevron stock.
According to the Hazeltree report, Chevron had the largest increase in stock borrowing for the month: the dollars of stock used to short (known as the ‘float’) rose to about 9% in April, up from 7% in March, an increase of more than $500 million.
This is a big trend in stock trading.
On the other side of the spectrum was Chevron, a stock that had been in the top half of trading trends over the past year.
The oil supermajor is being pressured by its refining margins and energy prices that have been down over the past year. Heavy supply of natural gas and warmer-than-expected winter also contributed to the weaker nat gas prices and poor energy earnings.
Chevron, however, was able to print a gain of 1.38% in April, adding $5 billion to its market cap, according to LSEG Datastream.
As such, along with the trends in stock trading of late, we’ve monitored how hedge funds have also tinkered with their approaches.
In the week before May 10, according to a recent update from the bank’s prime brokerage, a high number of funds cut long and short positions – a risk management move in stock trading today that seems prudent, given evolving market developments.
The New York Stock Exchange composite index, which includes Chevron and reflects these trends in cautious stock trading, fell more than 3% in April.
This shift in the index as a whole marks the broader feeling surrounding the stock trade, reflecting the highs and lows in many different economic and sector-specific factors over time.
Neither Chevron nor Tesla would comment on these developments; Tesla has yet to return my request for comment on where it stands in the ranks of short-sellers.
These developments underscore the volatility, the flux of the markets, as stock trading trends ebb and flow.
World shares held close to record highs on Tuesday as key indicators of the stock trading trends paused ahead of crucial US inflation data.
The MSCI’s world share index edged higher as global stock trading trends appeared tentative, 0.3% shy of an all-time high struck earlier this month in mid-March.
European benchmarks and S&P 500 futures in the US also hovered in steady territory in another sign of current stock trading trends in which investors are reluctant to make large bets ahead of critical economic announcements.
This risk-averse approach to stock trading trends is also exemplified by the attention paid to the release at 1230 GMT on Tuesday of the US producer price index.
This will be overshadowed by the consumer inflation numbers due out on Wednesday, which are a key factor in stock trading trends at the moment, and will also influence Federal Reserve interest-rate decisions.
‘Today’s a warm-up, but tomorrow’s U.S. CPI is what people are waiting for,’ said Jan von Gerich, chief strategist at Nordea, a Nordic banking conglomerate.
The markets are bracing themselves for the release of the US core CPI data tomorrow. Like it was two days ago. The third Wednesday of the month is the release date for the consumer price index (CPI), the most closely watched measure of inflation in the US.
The fear that the US core CPI may drop from 3.8% in March to 3.6% in April — provided by the preliminary numbers today — is keeping investors guessing if any recent spikes in stock trading trends were aberrations or harbingers of a deeper trend that could affect inflation in the future.
The yield on the 10-year US Treasury, the other critical signpost for trading styles in stock markets, was unchanged on the day.
But there were also nuanced influences on broader trends in stock trading beyond just the US, with the tiny outperformance of the UK gilt market holding lessons for traders in New York (let alone Tokyo), and the adjustments to the yield curve in Europe telling us something about adjustments in investor appetite across other markets.
And in the world of corporate news that can propel stocks higher or lower, Delivery Hero’s share price jumped 23% after Uber announced the acquisition of its key competitor, highlighting the day-to-day evolution of stock trading trends that are entwined with corporate actions.
Further corporate manoeuvring can be seen in Anglo American’s strategic reaction to a bid approach.
Recent interventions by the US president Joe Biden have further weighed on the global trends in stock trading: his announcement of tariffs on several categories of Chinese imports in March 2022 reportedly resulted in a premarket drop in the share price of Chinese electric vehicle makers, showing the immediate impact of geopolitical moves on trends in stock trading.
The rise of the Hang Seng index, another of the global stock-taking benchmarks, in Asia demonstrates a substantial inflow of money from buyers based on the mainland, showing regional shifts in stock-taking trends.
And it is worth noting that changes in Japanese bond yields followed the unexpected decision by the central bank, thereby illustrating shifts in monetary policy and stock-taking trends, both locally and worldwide.
Put together, these developments demonstrate a global context in which stock trading patterns are driven by macroeconomic data, corporate news and geopolitical events whereby traders and investors are constantly changing their tactical manoeuvres to adapt to emerging information.
