Wall Street Rally Stalls as Traders Weigh Growth Risks and Hunt for Fresh Catalysts – US Market Wrap

Stocks fell as valuation concerns overshadowed data indicating the economy is holding up. The figures had little impact on federal reserve bets, but bond yields increased. Bitcoin plummeted.

Following a string of all-time highs, the S&P 500 fell for the third consecutive session, the longest drop in a month. That is despite data showing that the US GDP grew at the fastest rate in nearly two years.

Equities have surged by more than $15 trillion from this year’s lows, fuelled by speculation that the economy is not sinking and that the market will be bolstered by rising corporate profits and the artificial-intelligence boom.

As a result, the S&P 500’s 12-month forward price-to-earnings ratio recently reached a high of 22.9, a level exceeded only twice this century: during the dot-com bust and during the pandemic rally in the summer of 2020, when the Fed cut interest rates to near-zero.
While the central bank’s attention has shifted to the labour market, traders will closely monitor Friday’s inflation report.

The S&P 500 dropped 0.5%. Short-dated bonds underperformed, with two-year yields rising six basis points to 3.66%. The dollar rose. The cryptocurrency slump accelerated ahead of a $22 billion options expiry.

Inflation-adjusted GDP, which measures the value of goods and services produced in the United States, rose at a revised 3.8% annual rate. This was greater than the previously reported 3.3% increase and followed an outright contraction in the first quarter.