Despite recent market volatility, the S&P 500 and Nasdaq Composite soared to new record highs on Wednesday, powered by significant gains in Nvidia and renewed optimism for Federal Reserve interest rate cuts. The S&P 500 reached an all-time high, while the Nasdaq Composite surged, led by Nvidia’s impressive performance. This remarkable market rally comes amid slightly weaker labour market data, which has boosted investor hopes that the Federal Reserve may ease its monetary policy later this year. As tech stocks lead the charge, other sectors showed mixed results, reflecting both the enthusiasm for artificial intelligence advancements and caution regarding broader economic conditions.

Key Takeaways:

  • S&P 500 and Nasdaq Close at Record High: The S&P 500 climbed 1.18% to close at a new record high of 5,354.03, with an intraday peak of 5,354.16. This milestone marks a significant rebound after a few sluggish weeks and brings the index’s year-to-date gain to 12.3%. The Nasdaq Composite advanced 1.96% to close at 17,187.90, setting a new record. This surge was largely fuelled by Nvidia’s 5.2% increase, as the company unveiled new AI chips, pushing its market value to $3 trillion.
  • Dow Jones Sees Modest Gains: The Dow Jones Industrial Average gained 96.04 points, or 0.25%, to close at 38,807.33, trailing behind the tech-driven surges of the S&P 500 and Nasdaq Composite. The modest increase was driven by mixed performances across various sectors, with notable strength in technology stocks, which lifted overall market sentiment.
  • Private Payrolls Data Signals Labor Market Weakness: ADP reported that private payrolls increased by only 152,000 jobs in May, falling short of the 175,000 expected by economists. This data has fuelled hopes that the Federal Reserve might cut interest rates, with Fed funds futures indicating a 69% chance of a rate cut in September.
  • European Stocks Rise Ahead of ECB Meeting: The Stoxx 600 closed up 0.84%, led by a 3.7% gain in tech stocks. The FTSE 100 Index was up 0.18%. ASML led the charge with an 8.1% increase, marking its highest close since March. Investors are anticipating the European Central Bank’s first rate cut since 2019. The ECB’s meeting on Thursday is highly anticipated, especially after the euro zone’s inflation rate came in slightly higher than expected at 2.6% for May, with core inflation at 2.9%.
  • Asian Markets Mixed Amid Economic Data and Election Results: Asia-Pacific markets showed a mixed performance, with India’s Nifty 50 and BSE Sensex rebounding nearly 2% after a significant sell-off following election results. Japan’s Nikkei 225 dropped 0.89%, while the broader Topix shed 1.41%. In contrast, South Korea’s Kospi rose 1.03%, and the smaller-cap Kosdaq gained 0.58%. Australia’s S&P/ASX 200 closed 0.41%, while China’s CSI 300 dipped to 3,594.79.
  • BoC Cuts Rates as Inflation Settles into Target Range, CAD Weakens: The Bank of Canada (BoC) reduced interest rates from 5% to 4.75% during its June meeting, citing increased confidence that inflation is on a downward trend. The central bank pointed to a declining three-month measure of core inflation as a key indicator of this improvement. However, the Governor cautioned that the path to stable inflation remains uncertain and fraught with risks.
  • Treasury Yields Fall Amid Economic Data: Treasury yields slipped, with the 10-year yield down 3 basis points to 4.299% and the 2-year yield falling to 4.73%. Investors are weighing the state of the economy amid key data releases, including weaker-than-expected US private payrolls and services data.
  • Oil Prices Rebound After OPEC+ Decision: Crude oil futures rose more than 1%, rebounding from four-month lows. West Texas Intermediate for July settled at $74.07 a barrel, up 1.12%, while Brent for August closed at $78.41 a barrel, up 1.15%. The rebound followed a decision by OPEC+ to gradually phase out production cuts, with the global oil balance expected to tighten before the increase in production begins in October.

FX Today:

  • Gold Price Surge on Weak US ADP Report Fuels Fed Rate Cut Speculation: Gold prices gained 1.18%, consolidating within the $2,320 to $2,360 range amid mixed US economic data and lower Treasury yields. Gold faces initial resistance at $2,360, with potential targets at $2,400 and the year-to-date high of $2,450. On the downside, support lies at the 50-day SMA of $2,337, followed by $2,300 and $2,280.
  • Silver Price Analysis: XAG/USD Tests ‘Double Top’ Neckline Around $30.00: Silver prices rose 1.69% to $29.98 as US Treasury yields dropped following weak US jobs data. The metal faces resistance at the May 24 low of $30.05. Failure to reclaim $30.00 may lead to further downside, with support at $29.79, $29.00, $28.74, and the ‘double top’ objective at $27.80.
  • USD/JPY Climbs Above 156.00: USD/JPY gained 0.79%, reaching 156.11 supported by strong US economic data. The pair’s first resistance is at 156.50, followed by the May 30 high of 157.68 and the April 26 high of 158.44. Support levels include 156.00, 155.00, and the 50-DMA around 154.81/92.
  • Canadian Dollar Struggles After BoC Rate Cut: The CAD weakened against the USD, with USD/CAD briefly hitting 1.3740 before settling around 1.3700. The BoC’s rate cut to 4.75% weighed on the currency, and traders now focus on upcoming Canadian labour figures and the US Nonfarm Payrolls report. USD/CAD remains near its 50-day EMA at 1.3650, with 2024’s high at 1.3845.
  • AUD/JPY Momentum Wanes, Consolidation Expected: AUD/JPY rose to 103.80, showing signs of waning momentum. Resistance levels are at the 20-day SMA of 103.80 and further at 105.00. If these resistances hold, the pair may continue to consolidate, with support from the 100 and 200-day SMAs.

Market Movers:

  • Nvidia Soars on AI Optimism: Nvidia shares surged 5.2%, reaching a new record and pushing the company’s market value to an impressive $3 trillion. This rally was fuelled by the unveiling of new AI chips and positive analyst forecasts, with Bank of America suggesting a potential 30% further rally. Nvidia’s stock performance highlights its dominant position in the AI sector.
  • Hewlett Packard Enterprise Hits New 52-Week High: Hewlett Packard Enterprise climbed 10.7%, achieving a new 52-week high after reporting fiscal second-quarter revenue of $7.2 billion, surpassing Wall Street estimates of $6.82 billion. The company’s adjusted earnings per share came in at 42 cents, beating the forecasted 39 cents.
  • CrowdStrike Jumps on Strong Earnings: CrowdStrike shares jumped 12% following a robust earnings report. The company posted adjusted earnings of 93 cents per share on $921 million in revenue, exceeding expectations of 89 cents per share on $905 million in revenue. The strong performance underscores CrowdStrike’s leading position in the cybersecurity market.
  • WalkMe Soars on Acquisition News: WalkMe’s stock skyrocketed 43% after SAP announced an all-cash acquisition deal valued at $1.5 billion. The deal is expected to close in the third quarter of 2024, significantly boosting investor confidence in WalkMe’s future prospects.
  • GameStop Rallies Amid Speculative Trading: GameStop shares rose 19.1%, continuing a speculative rally triggered by “Roaring Kitty,” a well-known investor in the stock. This surge follows a 5.4% decline in the previous session and highlights the ongoing volatility in meme stocks. AMC, another popular meme stock, also saw a 7.5% increase.
  • Dollar Tree Falls on Weak Guidance: Dollar Tree shares fell 4.9% after the company issued second-quarter guidance below expectations. The discount retailer projected adjusted earnings per share between $1 and $1.10, compared to the anticipated $1.19. Dollar Tree also announced it is exploring a potential sale of its Family Dollar unit.
  • Verint Systems Surges on Strong Earnings: Verint Systems saw its stock rise 23% following stronger-than-expected earnings and an upgrade in full-year guidance. The company reported adjusted earnings of 59 cents per share on $221.3 million in revenue, exceeding forecasts of 54 cents per share and $214.5 million in revenue.
  • Brown-Forman Declines on Revenue Miss: Shares of Brown-Forman dropped 5.9% to a new 52-week low after reporting fiscal fourth-quarter revenue of $964 million, falling short of the expected $1.03 billion. The disappointing revenue results weighed heavily on investor sentiment.
  • Applied Materials and KLA Boosted by Barclays Upgrade: Applied Materials and KLA shares rose 5.3% and 4.6%, respectively, after Barclays upgraded both stocks to equal weight from underweight. The upgrade was driven by anticipated growth in China spending, which is expected to benefit these semiconductor companies significantly.

As the markets reach new heights, with the S&P 500 and Nasdaq Composite setting fresh records driven by Nvidia’s remarkable performance and the anticipation of potential Fed rate cuts, investor sentiment remains resilient yet cautious. The mixed labour market data and upcoming key economic reports are pivotal as they will influence future monetary policy decisions. Meanwhile, significant movements in Europe and Asia are influenced by economic data and central bank actions. The notable gains in tech stocks underscore the sector’s strength and investor enthusiasm for AI advancements, while the broader market remains attentive to ongoing economic indicators and central bank policies.