Dow and S&P 500 Rally, Snapping Losing Streaks as Tech Leads Market Recovery

The Dow Jones Industrial Average and the S&P 500 experienced a notable rebound this week, breaking from recent losing streaks as optimism returned to technology stocks. Both indices ended their fall, with the Dow and the S&P 500 showing significant positive movements. This resurgence came amid easing geopolitical tensions in the Middle East and a market lifted by expectations for the upcoming major corporate earnings reports. Meanwhile, the calming of oil markets contributed to an easing of inflation fears, setting a more stable backdrop as investors awaited key economic data releases due later in the week.

Key Takeaways:

• Big Gains for Dow Jones, S&P 500, and Nasdaq: The Dow Jones climbed substantially, adding 253.58 points to close at 38,239.98, marking an increase of 0.67%. This gain reflects a strong rebound from last week’s losses, signalling renewed investor confidence. Meanwhile, ending a six-day slide, the S&P 500 rose by 0.87%, closing the session significantly higher at 5,010.60. The Nasdaq Composite advanced by 1.11% to reach 15,451.31, helped by tech giants like Nvidia, which saw a 4.4% increase after a steep decline the previous week.
• European Markets Find Stability: The Stoxx 600 index climbed 0.6%, with most sectors showing green. Telecom stocks led the gains, appreciating by 2.1%, while the auto sector experienced a modest dip, decreasing by 0.8%. In the UK, the FTSE 100 surged 1.6% to close at a record 8,023.87 points, surpassing its previous high. Meanwhile, Germany’s DAX increased by 0.6% and France’s CAC 40 edged up by 0.2%. Spain’s IBEX 35 also saw a notable rise, climbing 1.50% to end at an impressive 160.70 points higher.
• Asian Markets Rebound: Following a steady day, China’s benchmark indices remained relatively stable; the one-year and five-year loan prime rates stayed at 3.45% and 3.95% respectively. Hong Kong’s Hang Seng index leapt nearly 2%, while Japan’s Nikkei 225 rose by 1% to close at 37,438.61. The broader Topix index saw a larger gain of 1.38%, ending the day at 2,662.46. South Korea’s Kospi index advanced 1.45%, closing at 2,629.44, and the Kosdaq moved up by 0.46% to finish at 845.82. However, mainland China’s CSI 300 slightly retreated by 0.3% to close at 3,530.9, reflecting a mixed sentiment in the region.
• Crude Oil Prices Recede: US Crude Oil Prices Adjust Amid Geopolitical Tensions: US crude oil futures saw a slight decrease, with the West Texas Intermediate (WTI) contract for May falling by 29 cents to close at $82.85 a barrel. The US crude oil has experienced declines for most of the past twelve trading days but remains above the 200-day Exponential Moving Average (EMA), indicating potential support around the $79.00 mark. If the downtrend continues, WTI could test the congestion zone around the $78.00 handle.
• Crypto Market Reacts Positively to Bitcoin Halving: Bitcoin’s price increased by 2.86% to $66,560.39 following its fourth halving event, which reduces the block rewards for miners, potentially tightening supply. This uptick in Bitcoin also spurred gains across the crypto sector, with Ether rising 1.24% to $3,187.67. Notably, shares of major cryptocurrency miners like Marathon Digital and Riot Platforms jumped significantly, reflecting heightened investor confidence in the profitability of crypto mining post-halving.

FX Today:

• Gold Eases from Peak Levels: Gold prices recoiled from their approach toward a new all-time high of $2341, trading sharply lower at $2319.50. This adjustment suggests a potential pullback toward $2222 as the metal exits the overbought range. Despite being traditionally resistant to a stronger US dollar and Treasury yields, gold’s resilience is being tested as the broader market shifts away from safe havens due to improved risk appetite and robust US economic data.
• Silver Encounters Resistance, Retracts: Silver also witnessed a downturn, failing to breach the resistance zone at $28.40 and subsequently falling below the 2021-2022 major decline. This decline places the next critical support at $26.10, with further potential pullback targets around $25.30.
• GBP/USD Drops Amid BoE Rate Cut Speculations: The GBP/USD pair dipped to 1.2350, down 0.12%, as the market begins to price in a more dovish Bank of England. The lack of significant economic announcements from the UK has left the currency pair more vulnerable to broader market dynamics and stronger USD movements.
• USD/CAD Seeks New Support Levels: After failing to break past the 1.3800 resistance, USD/CAD has retreated, testing the lower boundary near 1.3700. A continued bearish trend could see the pair approaching a supply zone near 1.3550, as the Canadian dollar gains on the back of weaker USD momentum.
• AUD/JPY Aims Higher as Sentiment Improves: The AUD/JPY pair is recovering after recent geopolitical tensions, targeting the 100.00 level. The pair has formed a ‘hammer’ pattern indicating potential upside, with resistance seen near the year-to-date high of 100.81 and further significant levels at 101.00.
• NZD/JPY Maintains Uptrend Supported by Technical Indicators: The NZD/JPY pair continues its ascent, currently trading at 91.59. It remains buoyed above key SMA levels, indicating both short-term and long-term bullish trends. The currency pair has defended the 20-day SMA at 91.10, underscoring a strong buying sentiment.

Market Movers:

• Nvidia Leads Tech Recovery: Nvidia stood out with a notable rebound of 4.4%, closing up after last week’s 14% sell-off. This gain indicates a strong recovery for the chipmaker, signalling investor confidence in tech stocks amidst broader market uncertainties.
• Arm Holdings Registers Strong Gains: Following closely on Nvidia’s heels, Arm Holdings saw its shares surge nearly 7%, showcasing robust investor interest in semiconductor and AI technology sectors.
• Bank Stocks Provide Market Support: Financial institutions contributed significantly to the market’s uplift. Goldman Sachs led the charge among Dow Jones Industrials, with shares rising more than 3%. Citigroup and Capital One Financial also saw substantial gains, each climbing over 3%, indicating a bullish sentiment in the banking sector.
• Tesla Leads Tech Sell-Off: On the flip side, Tesla’s shares declined more than 3% following a price cut on its vehicles sold in China. This move is seen as an attempt to boost demand but raised concerns about the impact on profit margins and overall sales trajectory.
• Biotech Firms Show Volatility: Cardinal Health’s shares fell sharply by more than 5%, leading the losers in the S&P 500. The drop came after the company announced that its pharmaceutical distribution contracts with OptumRx would not be renewed, highlighting the volatility in the biotech sector.
• Communication Giants Under Pressure: Verizon Communications experienced a notable decline, dropping more than 4% after reporting Q1 operating revenue that fell short of market expectations. This contributed to its position as one of the biggest laggards in the Dow Jones Industrials.
• Cryptocurrency-Related Stocks Rally: Shares of major public cryptocurrency miners like Marathon Digital and Riot Platforms saw significant gains, jumping 6% and 23%, respectively, following the Bitcoin halving event which reduced miner rewards but historically has been a precursor to price increases in the cryptocurrency.
• Vista Outdoor Advised to Increase Offer: Vista Outdoor’s stock rose more than 6% after being advised by MNC Capital to increase its offer price from $37.50 per share, reflecting investor optimism about the deal’s potential to enhance value.
• Energy Sector Adjusts to Oil Price Movements: Despite broader market gains, the energy sector faced challenges with US crude oil prices slightly declining. The West Texas Intermediate contract for May fell 29 cents to $82.85 a barrel, affecting energy stocks and highlighting the sector’s sensitivity to crude oil price fluctuations.

The market performance showed a remarkable turnaround, with major US indexes rallying as technology shares rebounded and geopolitical tensions eased. While concerns over inflation and interest rates persist, investors appeared to regain optimism, mostly from the prospect of upcoming corporate earnings and economic data releases. As a result, Dow Jones and S&P 500 have snapped their losing streaks, carried by strong performances from tech giants like Nvidia and Arm Holdings, alongside a broad recovery in the banking sector. As the week progresses, attention will focus on key reports, including GDP and personal consumption expenditures, which could further shape market sentiment and inform the Federal Reserve’s policy decisions.