The Nasdaq Composite achieved a significant milestone on Tuesday, closing above the 17,000 mark for the first time ever, driven largely by Nvidia’s impressive performance. Meanwhile, the Dow Jones Industrial Average experienced a notable decline, shedding more than 200 points amidst broader market weakness. This contrast highlights the divergent performance within the major indices, as optimism around technology stocks clashed with broader market concerns and rising Treasury yields. Investor sentiment remains hopeful, supported by positive earnings reports and easing inflation expectations, even as the Federal Reserve signals a cautious approach to rate cuts.

Key Takeaways:

  • Nasdaq Breaks 17,000 Barrier: The Nasdaq Composite rose 0.59% to close at a record 17,019.88, reaching the 17,000 level for the first time ever. This milestone was driven by Nvidia’s impressive 7% surge, reflecting strong investor enthusiasm for technology stocks.
  • S&P 500 Posts Marginal Gain Amid Broad Weakness: The S&P 500 inched up just 0.02% to close at 5,306.04. Despite this slight gain, over 350 stocks within the index recorded losses, with significant declines in the health care, industrials, and financials sectors, each falling more than 1%.
  • Dow Jones Industrial Average Declines: The Dow Jones Industrial Average slipped 0.55%, or 216.73 points, to end at 38,852.86. The decline was primarily driven by drops in Merck and other health-related stocks, highlighting sector-specific challenges.
  • Treasury Yields Influence Market Sentiment: The 10-year Treasury yield rose nearly 7 basis points, surpassing the critical 4.5% level following a weak government auction. This rise in yields added pressure on market sentiment, reflecting investor concerns over interest rate trajectories.
  • Federal Reserve Commentary Highlights Rate Uncertainty: Minneapolis Federal Reserve President Neel Kashkari emphasised the need for “many more months” of data indicating easing inflation before considering rate cuts. His comments underscore ongoing caution, with potential for further rate hikes if inflation pressures resurface.
  • European Markets Close Lower: The pan-European Stoxx 600 index fell 0.6%, led by a 2.6% drop in travel and leisure stocks. Major indices such as France’s CAC 40 and Germany’s DAX also declined, down 0.9% and 0.5%, respectively. The UK’s FTSE 100 slipped 0.7%. In contrast, shares of Ocado surged nearly 10% following a significant deal with Turkish delivery firm Getir. 
  • Asia-Pacific Markets Mixed: Japan’s Nikkei 225 dipped 0.11% to 38,855.37, while Australia’s S&P/ASX 200 fell 0.28% to 7,766.70 after retail sales growth missed expectations. South Korea’s Kospi ended flat at 2,722.85, and China’s CSI 300 index decreased by 0.73% to 3,609.17.
  • Oil Prices Surge Ahead of OPEC Meeting: US crude oil futures rose nearly 3%, with West Texas Intermediate closing at $79.83 a barrel, up 2.71%. Brent futures increased 1.35% to $84.22 a barrel, as markets anticipated key production decisions from OPEC .

FX Today:

  • Gold Prices Edge Higher Amid Rising Treasury Yields: Gold prices gained over 0.30%, trading around $2,360, despite pressures from higher US Treasury yields. If gold fails to hold above $2,350, it could face further declines, with key support levels at $2,303 and $2,277.
  • GBP/USD Stays Firm Despite Resistance at 1.2800: The GBP/USD pair tested the 1.2800 figure but retreated due to technical resistance at around 1.2803. Key support levels are at 1.2762, followed by the 50-SMA at 1.2759, and the 100-SMA at 1.2736/39. If buyers push above 1.2803, a re-test of the year-to-date high of 1.2893 is possible.
  • USD/JPY Advances Modestly and Reclaims 157.00: USD/JPY traded at 157.14 after reaching a two-week high of 157.15. Key resistance levels include the April 26 high at 158.44 and the year-to-date high at 160.32. Support levels to watch are 156.05 and 155.72, with additional support at 155.39 and the 50-day moving average at 154.08.
  • USD/CAD Rebounds Amid Market Volatility: USD/CAD tested 1.3650 after recovering from a dip below 1.3620, with 1.3600 forming a significant technical barrier. The pair is down 0.8% from last week’s peak above 1.3740 and is trading near the 50-day Exponential Moving Average (EMA) at 1.3642, indicating ongoing market congestion.
  • AUD/NZD Clears Daily Losses Despite Weak Data: AUD/NZD reached 1.0852 during Tuesday’s session, overcoming earlier losses despite soft Australian retail sales data. The pair trades above its 100-day and 200-day Simple Moving Averages (SMA), at 1.0813 and 1.0808 respectively, suggesting a medium-to-long uptrend, though it remains below the 20-day SMA at 1.0942, highlighting short-term dominance.

Market Movers:

  • Nvidia Continues Upward Momentum: Nvidia advanced 7.13%, continuing its rally following last Wednesday’s quarterly earnings report. Additionally, Elon Musk’s AI startup xAI, which recently raised $6 billion, plans to build a new supercomputer, further boosting Nvidia’s prospects. Nvidia is now worth more than Meta, Tesla, Netflix, AMD, Intel & IBM put together.
  • GameStop Surges on Stock Sale News: Shares of GameStop jumped 25.16% following the announcement that the video game retailer raised about $933 million from a stock sale. This significant capital injection boosted investor confidence in the company’s financial stability and future growth prospects.
  • Gambling Stocks Decline: DraftKings and US-traded shares of FanDuel parent Flutter Entertainment fell 10.29% and 7.73%, respectively. The declines followed the Illinois Senate’s approval of a state budget including a measure to raise taxes on sports betting, with a progressive tax rate based on company revenue.
  • US Cellular Gains on Acquisition Announcement: US Cellular shares added 12.19% after announcing that T-Mobile will acquire its wireless operations and 30% of its spectrum assets for $4.4 billion. The deal is expected to close mid-next year. T-Mobile shares rose 0.79%, while Telephone and Data Systems, which owns 84% of US Cellular, gained 1.65%.
  • Insmed Soars on Positive Drug Trial Results: Insmed stock soared 118.67% after announcing successful late-stage trial results for its chronic lung disease drug candidate, brensocatib. The study showed a significant reduction in the annualised rate of pulmonary exacerbations in noncystic fibrosis bronchiectasis. Insmed plans to file for FDA approval in the fourth quarter.
  • Duolingo Rallies on Upgrade: Duolingo shares rallied 8.83% following an upgrade to outperform by JMP. The firm cited the potential growth driven by Duolingo Max, the company’s new subscription tier, and artificial intelligence advancements.
  • Semler Scientific Adopts Bitcoin, Shares Surge: Semler Scientific stock surged 24.36% after the company announced it has adopted bitcoin as its primary treasury reserve asset, purchasing 581 bitcoins for about $40 million. This move aligns with strategies seen in companies like MicroStrategy.
  • Atlantica Sustainable Infrastructure Falls on Acquisition News: Shares of Atlantica Sustainable Infrastructure fell 5.17% after agreeing to be acquired by Energy Capital Partners and co-investors for $22 per share in cash.
  • Agios Pharmaceuticals Rises on Royalty Deal: Agios Pharmaceuticals shares popped 23.21% after announcing it will sell the rights to its 15% royalty on the brain cancer drug vorasidenib to Royalty Pharma for $905 million. Agios will retain a 3% royalty on annual U.S. net sales exceeding $1 billion.
  • Norwegian Cruise Line Upgraded: Norwegian Cruise Line stock rose 3.5% after Mizuho upgraded it to buy from neutral, citing an improved outlook for earnings growth and potential sentiment change as the stock has been a popular short-seller target.
  • Sarepta Therapeutics Declines on Downgrade: Sarepta Therapeutics shares sank 8.21% following a downgrade by RBC Capital Markets to sector perform from outperform. The firm expressed a less compelling outlook amidst growing expectations for the FDA’s label expansion of gene therapy Elevidys.
  • Zscaler Downgraded Amid Competitive Pressures: Zscaler shed 4.36% following a downgrade by Wells Fargo to equal weight from overweight, citing mounting competitive pressures.
  • Airbnb Upgraded Amid Strong Travel Demand: Airbnb stock rose 1.76% after Wedbush upgraded it to outperform, citing an attractive entry point due to recent underperformance and strong travel demand.
  • Elanco Animal Health Gains on FDA Approval: Elanco Animal Health shares added 2.08% after the FDA confirmed that its Bovaer methane-reducing feed ingredient met safety and efficacy requirements.

As May draws to a close, the markets reflect a dynamic mix of hope and caution, with the Nasdaq reaching historic highs driven by the tech sector’s robust performance, particularly Nvidia’s impressive surge. Meanwhile, the Dow’s decline underscores broader market challenges, especially within the healthcare sector. Rising Treasury yields and cautious signals from the Federal Reserve add layers of complexity to the investment landscape, even as hopes for inflation easing and potential rate cuts remain. With European markets reacting to upcoming inflation data and ECB rate cut hints, and Asia-Pacific markets navigating mixed signals from economic data and central bank comments, investors are closely monitoring these developments. As the markets await economic reports and policy decisions, the overall sentiment remains balanced, driven by strong earnings yet kept passive by macroeconomic uncertainties.