EBC Markets Briefing | US stocks notch records before Fed decision

The Nasdaq 100 and the S&P 500 rose on Tuesday to end at all-time highs While investors expect no change to the Fed funds target rate, the FOMC is expected to release its Summary of Economic Projections.

Investors remain too optimistic about the timing of a Fed interest-rate cut, according to RBC Capital Markets strategists, who see the risk of an 8% slump in US stocks if easing fails to materialise this year.

If the central bank were to cut rates as expected, but earnings came in below projections, the S&P 500 would trade around 5,100 points — about 5% lower than current levels, they added.

Fund managers net sold US technology stocks for the third straight week, according to Goldman Sachs Group Inc.’s prime brokerage desk. They also reversed the prior week’s trading strategy.

Within tech, semiconductors stocks were the most notionally net sold for the week ended June 7, while software names were the most net bought. Whether the shift was change of a course remains to be seen.

Seven of the top 10 most traded US equities in May are penny stocks, according to Cboe Global Markets data. The huge volumes in so many little-known stocks suggest the market was getting frothy.

There are few signs of a turnaround as technical indicators show. If the Fed turns more hawkish in any way later in the day, the 50 EMA could help stem the decline.

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