U.S. stocks drift lower after strong durables data

What’s driving markets

Stocks were unable to hang on to early gains, with futures trimming advances ahead of the bell after data showed U.S. durable-goods orders rose by 0.7% in May, versus forecasts for a 0.2% rise.

“The surprisingly robust 0.7% rise in durable goods orders last month was much better than some of the downbeat survey evidence had suggested and is consistent with business equipment investment growth slowing in the second quarter rather than going into reverse,”

Stocks bounced last week in a move analysts credited to expectations a slowing economy could see the Federal Reserve hike rates less aggressively than previously expected.

“The S&P 500 is nearly 8% up from its lows at the start of the month and rallied 3% on Friday. Helping the rally has no doubt been last week’s re-pricing of tightening cycles around the world where 25-50 basis points of expected tightening were removed from some money market curves in just a few days. Driving that pricing seemed to be the much broader discussion — including from Federal Reserve Chair Jerome Powell — over the risks of recession,” wrote analysts at ING, in a Monday note.

Powell last week warned lawmakers that achieving a so-called soft landing for the economy as the Fed tightens interest rats would be “very challenging.”

Strategists at Credit Suisse say bond yields may have seen their peak, particularly for Treasury-inflation protected securities, which in turn means the dollar
DXY,
-0.24%
is close to its summit. They say their lead indicators are consistent with 0% GDP growth, as evidenced by the collapse in housing affordability, the weakness of corporate confidence and the weakness in the employment gauge of the Institute for Supply Management manufacturing index.

JPMorgan quantitative strategist Marko Kolanovic published a note saying the market could rise 7% this week, due to the need for portfolios to rebalance as the month, quarter and first half closes. That effect already played out near the end of the first quarter, and near the end of May.

Group of Seven economic powers are meeting in Germany where they expect to announce an agreement on a price cap on Russian oil.

Companies in focus

• Frontier Airlines parent Frontier Group Holdings Inc.
  ULCC,
  -9.91%
  issued a letter to Spirit Airlines Inc.
  SAVE,
  -7.79%
  shareholders, urging them to support the air carriers’ agreed upon merger deal. In the letter, Frontier Chairman William Franke and Chief Executive Barry Biffle say the recently amended Frontier-Spirit deal offers Spirit shareholders value “well in excess” of JetBlue Airways Corp.’s
  JBLU,
  +0.75%
  “illusory proposal, which lacks any realistic likelihood of obtaining regulatory approval.” Frontier shares fell 7.5%, while Spirit shares dropped 7.4% and JetBlue shares gained 0.4%.

Other assets

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  3.173%
  rose 2 basis points to 3.125%. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar Index
  DXY,
  -0.24%
  edged down 0.2%.

• Bitcoin fell 1.4% to trade below $20,800.

• Oil futures turned lower, with the U.S. benchmark
  CL.1,
  -0.40%
  down 1.2% near $106.30 a barrel. Gold
  GC00,
  -0.13%
  was flat at $1,830 an ounce.

• The Stoxx Europe 600
  SXXP,
  +0.17%
  rose 0.1%, while London’s FTSE 100
  UKX,
  +0.35%
  gained 0.3%.

• The Shanghai Composite
  SHCOMP,
  +0.88%
  ended 0.9% higher, while the Hang Seng Index
  HSI,
  +2.35%
  jumped 2.4% and Japan’s Nikkei 225
  NIK,
  +1.43%
  rose 1.4%.