US stocks edge higher in thin trading ahead of Fed decision next week

Wall Street’s benchmark S&P 500 index inched higher on Friday in subdued trading, as traders largely stayed on the sidelines ahead of the Federal Reserve’s policy meeting next week.

The S&P 500 ended the day up 0.1 per cent, having reached a 10-month high in intraday trading. The gain pushed the blue-chip stock index deeper into bull market territory as it rose more than 20 per cent above its most recent low in October.

Trading in the S&P was muted, with the lowest daily trading volume since October 2022, suggesting investors were holding off on making large bets ahead of the US central bank’s meeting next week.

The Fed is expected to hold off on raising interest rates, marking the first pause in its 14-month endeavour to tame inflation. Expectations of a pause in June gained steam after US unemployment data on Thursday pointed to a cooling labour market.

“Markets jostled with weekly US jobs data that showed unemployment on the rise, giving the Fed more reason to consider a pause in rate hikes when it meets next week,” said Matt Britzman, equity analyst at Hargreaves Lansdown. “And the big benefactors? Big Tech of course.”

The tech-heavy Nasdaq Composite gained 0.2 per cent, buoyed by expectations for a pause in interest rate rises, as well as a 4.1 per cent jump in the shares of Tesla.

The carmaker’s shares rose for an 11th consecutive day after it locked in a deal that allowed General Motors customers to use its electric-vehicle charging system, a similar agreement to one it struck with Ford last month.

On a weekly basis the S&P 500 rose 0.4 per cent to record its fourth consecutive weekly winning streak, while the Nasdaq Composite was up 0.2 per cent over the same period for its seventh consecutive week of gains.

As an indication of the calm spreading across markets, the Vix volatility index hit 13, its lowest level since the onset of the panic over the coronavirus pandemic three years ago. The benchmark is a measure of expected swings in the S&P over the coming month.

Yet the yield on the two-year US Treasury note, which is sensitive to rate expectations, rose 0.08 percentage points to 4.6 per cent. The yield on the 10-year note rose 0.03 percentage points to 3.74 per cent. Bond yields rise as prices fall.

In Europe, equities ended the day lower, with the region-wide Stoxx 600 falling 0.1 per cent and Germany’s Dax shedding 0.3 per cent. London’s FTSE 100 fell 0.5 per cent.

European gas futures soared 21.5 per cent to €31.75, ending a volatile week higher and ahead of an expected heatwave in parts of Europe over the weekend.

In Turkey, the lira extended its fall to record lows, down 1 per cent to 23.34 against the dollar, after President Recep Tayyip Erdoğan appointed former US banker Hafize Gaye Erkan to lead the country’s central bank. 

This article has been amended to reflect the S&P 500 crossed a threshold last hit in August