US stocks are struggling in the direction of opening gains despite strong data on durable goods

What drives the markets?

Shares struggled to hold up after data showed US orders for durable goods rose 0.7% in May, against forecasts for a 0.2% rise, and pending home sales picked up again last month, reversing a six months decline. Investors were caught between recession and fear of inflation.

“Equities cannot win right now, whether the economic data softens and the economy is much weaker than we thought or robust measures pave the way for the Fed to be more aggressive with the inflation battle,”[ads1]; said Edward Moya, senior market analyst at Oanda, in a note.

Shares had jumped last week in a move that analysts credited expectations that a declining economy could see the Federal Reserve raise interest rates less aggressively than previously expected. Fed Chairman Jerome Powell warned lawmakers that achieving a so-called soft landing for the economy when the Fed tightens interest rates would be “very challenging.”

JPMorgan’s quantitative strategist Marko Kolanovic published a note saying that the market may rise 7% this week, due to the need for portfolios to rebalance when the month, quarter and first half of the year close. This effect took place already towards the end of the first quarter, and towards the end of May.

“The S&P 500 is up almost 8% from its lowest point at the beginning of the month and rose 3% on Friday,” according to analysts at ING, in a Monday note. “Helping the rally has undoubtedly been last week’s reprising of austerity cycles around the world, where 25-50 basis points of expected austerity were removed from some money market curves in just a few days. The much broader discussion – including from central bank governor Jerome Powell – about the risk of recession seemed to be the driving force behind this pricing.

Strategists at Credit Suisse say that bond yields may have peaked, especially for inflation-linked government bonds, which in turn means the dollar DXY
is near the top. They say that their leading indicators are in line with 0% GDP growth, which is reflected in the collapse in affordability, the weakness in corporate confidence and the weakness in the employment meter of the Institute for Supply Management’s production index.

A group of seven economic powers meet 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
  issued a letter to Spirit Airlines Inc.
  SAVE
  shareholders, and encourages them to support the airlines’ agreed merger agreement. In the letter, Frontier Chairman William Franke and CEO Barry Biffle said the recently amended Frontier-Spirit agreement gives Spirit shareholders value “well above” JetBlue Airways Corp
  JBLU
  “illusory proposal, which lacks any realistic probability of obtaining regulatory approval.” Frontier shares fell more than 10%, while Spirit shares fell 8% and JetBlue shares rose 1.3%.

Other assets

• The return on the 10-year government bond BX: TMUBMUSD10Y
  increased 4 basis points to 3.166%. Interest rates and debt prices move in opposite directions.

• ICE US Dollar Index DXY
  went down 0.4 percent.

• Bitcoin BTCUSD
  fell 3.4% to trade close to $ 20,675.

• Oil futures traded higher in choppy trading, with the US benchmark CL
  up 1.3% near $ 109.04 per barrel. Gull GC00
  was 0.2% below $ 1,827 per ounce.

• Stoxx Europe 600 XX: SXXP
  ended 0.5% higher, while London’s FTSE 100 UK: UKX
  increased 0.7 percent.

• Shanghai Composite CN: SHCOMP
  ended 0.9% higher, while the Hang Seng index HK: HSI
  jumped 2.4% and Japanese Nikkei 225 JP: NIK
  rose 1.4 percent.

– Steve Goldstein contributed to this article.