Stocks rose Tuesday, with the Nasdaq Composite reaching a new closing high amid fresh US economic data and anticipation of a key inflation report. The Nasdaq saw significant gains, while the S&P 500 and Dow Jones Industrial Average also closed higher. The producer price index (PPI) for April exceeded expectations, indicating persistent inflation and diminishing hopes for Federal Reserve rate cuts later this year. Despite an initial negative reaction, markets stabilised as revised March wholesale prices eased some concerns. Federal Reserve Chair Jerome Powell reiterated on Tuesday that inflation is falling more slowly than expected, suggesting that the central bank will maintain its current interest rates for an extended period.

Key Takeaways:

  • Nasdaq Hits Record Close: The Nasdaq Composite surged 0.75% to close at 16,511.18, marking a new all-time high. This performance was driven by investor optimism around tech stocks, highlighting the market’s resilience ahead of the upcoming inflation report.
  • S&P 500 Gains while Dow Jones Adds Over 100 Points: The S&P 500 increased by 0.48%, finishing the session at 5,246.68. The Dow Jones Industrial Average rose 126.60 points, or 0.32%, to close at 39,558.11. This increase continues the Dow’s upward momentum, showcasing investor confidence despite economic uncertainties.
  • Producer Price Index Surpasses Estimates and Revised March Wholesale Prices: April’s producer price index (PPI) rose by 0.5% month-over-month, higher than the 0.3% increase anticipated by economists, indicating stronger wholesale price pressures and suggesting that inflation might persist longer than expected. However, March’s wholesale prices were revised down to show a 0.1% decline.
  • European Stocks Edge Higher Amid Inflation Data: The pan-European Stoxx 600 index ended 0.2% higher, with most sectors in positive territory. Auto stocks led the gains, up more than 1.3% for the session. The FTSE 100 Index in the UK rose by 0.16% to 8428.13. U.K. unemployment increased to 4.3% in the three months to March, up from 4.2% in the previous period, while wages excluding bonuses rose by 6.0% year-on-year, slightly above the forecasted 5.9%.
  • Asia-Pacific Markets Mixed: Japan’s Nikkei 225 and Topix saw gains of 0.46% and 0.25%, closing at 38,356.06 and 2,730.95, respectively. South Korea’s Kospi rose 0.11% to 2,370.34, while the Kosdaq gained 0.9% to 862.15. In Australia, the S&P/ASX 200 fell 0.3% to 7,726.8. Hong Kong’s Hang Seng index reversed gains to trade 0.1% lower, and China’s CSI 300 index dropped 0.21% to 3,657.05.
  • Oil Prices Decline: Brent crude futures fell by 98 cents to $82.38 a barrel, and US West Texas Intermediate crude futures dropped $1.07 to $78.05 a barrel. Persistent inflation concerns and the potential for prolonged Federal Reserve rate hikes contributed to this decline.

FX Today:

  • EUR/USD Lurches Back Over 1.0800 Ahead of Hectic Wednesday: EUR/USD jumped on Tuesday, pushing the pair further into near-term bullish territory, recovering above 1.0800 and reaching its highest levels since early April. The pair has been on a wobbly recovery from the last major swing low near the 1.0600 handle, rising over 2% since mid-April. Tuesday’s bullish bid has brought the pair back at 1.0797, with the last swing high failing to capture the 1.0900 level.
  • Canadian Dollar Struggles to Hold onto Gains Against Greenback: USD/CAD slid back into a familiar demand zone below 1.3660, with the pair treading water in the near term. Bids continue to cycle near the 200-hour EMA at 1.3691. Technical support is evident in the daily candles at the 50-day EMA near 1.3640, and USD/CAD is still trading north of the 200-day EMA at 1.3546 despite trading on the low side of the last swing high near 1.3850. The pair is up over 3% for 2024.
  • GBP/JPY Continues Slow Grind Higher Despite Off-Kilter UK Labour Figures: GBP/JPY rose further on Tuesday, clipping into the 197.00 handle as the broader FX market continues to sell the Japanese Yen across the board. UK labour figures wobbled on Tuesday, yet the pair trades at 194.95. Sterling’s gains against the Yen have pushed GBP/JPY back into the 197.00 handle for the first time since early May.
  • EUR/JPY Rallies for Seventh Straight Day as Bulls Target 170.00: EUR/JPY trades with gains of 0.44%, at 169.27 at the time of writing. The first key resistance level would be at 169.39. Once surpassed, the next target for sellers’ defence would be the 170.00 figure, followed by the year-to-date (YTD) high at 171.58. Conversely, if EUR/JPY retreats below 169.00, downward pressure could increase.
  • Gold Price Surges Above $2,350 Amid Hot US PPI: Gold’s uptrend extended after posting losses on Monday, yet it remains below the latest cycle high of $2,378, seen on May 10. This could keep the XAU/USD range bound. The next technical hurdle would be the psychological $2,400 mark, immediately followed by $2,417, and the all-time high at $2,431. Conversely, if sellers moved in and pushed prices below $2,359, that could sponsor a leg down toward the low of $2,306, followed by the $2,300 figure.
  • Silver Tests Resistance at Around $28.70 Shy of Reclaiming $29.00: During the last three days, Silver has been seesawing within the $28.00-$28.80 range after registering exponential gains. For a bullish continuation, buyers need to reclaim the $29.00 psychological figure. Once cleared, the next stop would be the year-to-date (YTD) high at $29.79, followed by the $30.00 mark. Conversely, if sellers stepped in and pushed prices below $28.00, look for further losses. The first demand zone would be at $27.70.

Market Movers:

  • GameStop Surges on Meme Stock Frenzy: GameStop shares skyrocketed approximately 60% following a renewed trading frenzy fuelled by the return of “Roaring Kitty.” This surge comes despite the movie theatre company AMC, which also saw a significant increase of 32%, completing a $250 million stock sale during Monday’s volatile trading. Other meme stocks also experienced notable gains, with BlackBerry rising 11.9% and Koss jumping over 40%.
  • Alibaba Drops on Earnings Report: Alibaba shares fell 6% after the Chinese technology giant reported an 86% drop in net income for its fiscal fourth quarter. Despite topping revenue expectations, the significant decline in net income raised investor concerns, leading to the stock’s decline.
  • Reddit Shares Continue to Climb: Reddit shares popped 7% on Tuesday, marking the second consecutive day of gains. Retail traders have driven a buying frenzy, pushing the stock to close at $62.34, its second-highest close since the IPO in March.
  • Sony Rises on Strong Revenue: US-listed shares of Sony jumped 6.7% after the company reported quarterly revenue of 3.5 trillion yen, surpassing analysts’ expectations of 2.89 trillion yen. However, operating profits came in lower than anticipated, tempering the overall positive market reaction.
  • Vodafone Gains on Strong Earnings: Vodafone shares rose 4.8% after the UK-based telecommunications company posted full-year profits that beat expectations. The company reported a 2.2% rise in annual organic adjusted earnings, driven by strong performance in Britain and Germany.
  • On Holding Jumps on Earnings Beat: Shares of On Holding surged 18.3% after the shoe maker reported first-quarter earnings that far exceeded analysts’ expectations. This gain marked the best day for the stock since March 2023, reflecting strong market confidence in the company’s growth trajectory.
  • Newell Brands Rallies on Upgrade: Newell Brands’ stock rallied 5.7% following an upgrade from Barclays, which raised its rating from underweight to equal weight. Barclays cited the business’s progress toward normalization after the pandemic-induced demand surge.
  • Delivery Hero Jumps on Uber Deal: Shares of Delivery Hero surged 26% after announcing that Uber would acquire its Foodpanda business in Taiwan as part of a broader $1.25 billion deal. The news also lifted rival delivery firms Just Eat and Hellofresh.
  • Anglo American Falls on Strategic Overhaul: British miner Anglo American saw its shares fall 3.2% following the announcement of a strategic overhaul aimed at simplifying its business. The company faces ongoing takeover attempts by rival BHP Group, contributing to investor uncertainty.
  • Rheinmetall Drops on Profit Report: German arms manufacturer Rheinmetall’s shares fell 3.1% after reporting a below-estimates increase in first-quarter profits. Despite the profit increase, the results failed to meet analyst expectations, leading to a drop in the stock price.

As the market awaits Wednesday’s critical consumer inflation report, the record highs in the Nasdaq Composite and S&P 500 underscore the sustained investor enthusiasm for technology and growth stocks, despite persistent inflation concerns. The producer price index’s higher-than-expected rise and Federal Reserve Chair Jerome Powell’s cautious remarks on inflation have tempered expectations for imminent rate cuts. European and Asian markets reflected mixed sentiments, with notable movements driven by corporate earnings and strategic shifts.