market insights

Weekly Market Insights: Interest Rate Hike Paused

Last week, the notable development was the decision by the US Federal Reserve to maintain interest rates at their current levels. The Federal Open Market Committee (FOMC) meeting confirmed that there would be no immediate rate hikes, marking the first pause since early 2022. The benchmark rate remains steady at 5 to 5.25 percent. However, the Federal Reserve did indicate the possibility of two more rate increases later in the year.

What you need to know

The S&P 500 index demonstrated its strength by achieving a fifth consecutive weekly gain, which is its longest such streak since the autumn of 2021. Nevertheless, the S&P 500 experienced a slight decline on Friday, dropping 0.4% to 4,409. This dip coincided with an extensive $4.2 trillion options expiry and the approaching long weekend, as the market would be closed on Monday for a public holiday.

The VIX, measuring the implied volatility of the S&P 500, reached a new 3-year low at 13.5. Most sectors within the S&P 500 saw declines, except for utilities, materials, and consumer staples, which managed to achieve modest gains. The Nasdaq 100 also declined by 0.7%, settling at 15,083.

Micron issued a warning on Friday regarding the negative impact on its revenue resulting from a Chinese ban on chip sales to key domestic industries. The company stated that approximately half of its revenue from China-based firms, equivalent to a low double-digit percentage of its total revenue, would be affected, surpassing its earlier estimate of a low-to-high single digits percentage impact. However, Micron announced a significant investment of 4.3 billion yuan ($603.8 million) over the next few years in its chip packaging facility in Xian, China. CEO Sanjay Mehrotra emphasized the company’s unwavering commitment to its China business and team. Additionally, Micron is diversifying its supply chains and has invested $1 billion in a semiconductor packaging factory in India.

What’s happening in Singapore

The decision to pause interest rate hikes likely brought relief to many, as reflected in the performance of the Straits Times Index (STI), which gained 2.3% during the week leading up to Friday’s (Jun 16) morning session. Singapore REITs emerged as one of the better-performing sectors of the STI after the FOMC meeting, with the iEdge S-REIT Index recording an increase of over 3.5% during the same period.

Among the 40 actively traded Singapore REITs and property trusts on Thursday’s session following the FOMC meeting, there were 23 gainers, six decliners, and 11 REITs that ended the day with no change in value.

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