US close: Didi leads gains as investors look for Fed clues

Didi ChuxingSharecast graphic / Josh White

US stocks were still above the waterline by the closing bell on Monday, though they had trimmed some of their earlier gains, as Didi rocketed ahead after reports that regulators in Beijing were close to concluding a probe into the ride-hailing app, and allow it to restore service domestically.

At the close, the Dow Jones Industrial Average was up 0.05% at 32,915.78, as the S&P 500 added 0.31% to 4,121.43 and the Nasdaq Composite was ahead 0.4% at 12,061.37.

“It looks like investors are having another go at extending the rally in equity markets on both sides of the Atlantic,” said IG chief market analyst Chris Beauchamp.

“Such renewed strength after what was ultimately an indecisive end to May will provide some comfort for investors, but with oil surging again the spectre of inflation and rate hikes is never far away.

“Even with the ECB likely to be more hawkish this week, however, there seems space for a further squeeze to the upside for a while yet.”

In commodity markets, oil prices were in the green after Saudi Arabia decided to lift prices for its crude sales next month despite OPEC and allies agreeing last week to increase production more than planned.

West Texas Intermediate futures were last up 0.47% at $119.43 per barrel on NYMEX, while the ICE quote for Brent crude was 0.51% firmer at $120.33.

On the macroeconomic front, all eyes were looking towards May inflation data for the US, due on Friday.

“As we look ahead to this week’s US CPI numbers for May, the main worry for investors is that in their increasing urgency to contain upside risk in inflation, central banks tighten monetary policy too quickly and tip the global economy into recession,” said CMC Markets analyst Michael Hewson.

“Putting to one side the fact that surging inflation is probably already doing that in terms of a cost-of-living squeeze on consumption patterns, markets appear to be navigating a tightrope of concern over which is the better option.”

Hewson said it was becoming “increasingly obvious” from the tone of a number of Fed policymakers that a pause in the US rate hiking cycle was growing more unlikely.

“Last week we heard from Fed vice chair Lael Brainard, who is generally considered one of the more dovish voices on the FOMC, arguing that the case for a September pause was a hard one to make.

“This suggests little in the way of a consensus for a delay at this point.”

In equities, Didi Global rocketed 24.32% by the end of trading, following a Wall Street Journal report that China was planning to conclude its cybersecurity probe and lift its ban on new users.

“The authorities are also looking at allowing Didi’s app back on domestic app stores this week,” said Victoria Scholar, head of investment at Interactive Investor.

“Last July, its app was removed after Chinese authorities opened a data-security probe for ‘national security reasons’.

"China’s regulatory crackdown really took its toll on Didi which posted a $4.7bn loss at the end of last year.”

Scholar said a majority of shareholders voted in May for Didi to delist from the New York Stock Exchange.

“Whether this report means these plans are overturned is yet to be seen.

“However, it is clear that the prospect of Beijing loosening its grip on the tech company would be extremely welcomed by investors.”

Spirit Airlines ascended 7.04% after JetBlue Airways sweetened its offer for the carrier, raising the stakes in its battle against Frontier Airlines for the burgeoning ultra-low cost airline.

JetBlue shares were 2.1% higher at the close, while Frontier Group advanced 4.49%.

Elsewhere, Amazon was up 1.99% after its 20-for-1 stock split came into effect, changing the price of its shares from almost $2,500 at the end of Friday, to just under $125 on Monday.

In index action, coffee and soda pusher Keurig Dr Pepper was up 5.07% and ON Semiconductor added 4.88% after S&P Dow Jones Indices confirmed the two companies would join the S&P 500 in its next reshuffle.

The two firms will replace laser technology firm IPG Photonics and fashionable fitness apparel brand Under Armour, which will be demoted to the S&P MidCap 400.

On the downside, Twitter stock fell 1.49% after Elon Musk threatened to abandon his $44bn takeover of the social network if it refused to hand over data on spam and fake accounts.

Tesla chief Musk said Twitter was "actively resisting and thwarting" his information rights under the merger agreement, and that this was "a clear material breach" of Twitter’s obligations.

Shares in Tesla were 1.6% firmer by the end of the day.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk.

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