Major US equity indices witnessed a strong opening on the last trading day of the week and were supported by strong gains in banking stocks.
After passing the Federal Reserve’s annual stress tests, several US banks announced plans to return capital to shareholders and were registering strong gains during the initial hour of trade on Friday. Investors were also be encouraged by the iconic athletic wear, Nike’s positive earnings report and signs that China may be trying to ease trade-related pressures.
Today’s strong up-move move comes after a fairly volatile week, triggered by escalating worries about a full-blown global trade war and its implication on the global economy. Meanwhile, a strong rally across European equity markets in reaction to an agreement on the divisive issue of migration also helped inspire investors and remained supportive of the early positive trading sentiment.
On the economic data front, the core PCE Price index, the Federal Reserve’s preferred inflation gauge, rose 0.2% m/m in May and the rate of inflation over the past 12 months rose to 2.0%. The reading pointed to increasing inflationary pressure, which might prompt the Fed to opt for an aggressive monetary policy tightening cycle and eventually keep a lid on any meaningful gains for equities.
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