Despite the usual market challenges, the S&P 500 and Nasdaq Composite achieved fresh record highs on Tuesday, driven by heightened investor interest in artificial intelligence and the anticipation of Nvidia’s earnings report. The Nasdaq Composite rose marginally, while the S&P 500 also added 0.25%. This rally in tech stocks, particularly Nvidia, highlights the optimism surrounding AI’s potential to enhance corporate profits. Meanwhile, the Dow Jones Industrial Average saw a modest increase of 0.17%, indicating a generally positive market sentiment despite some sectoral weaknesses and upcoming Federal Reserve comments.

Key Takeaways:

  • Nasdaq and S&P 500 Set New Records: The Nasdaq Composite rose 0.22% to close at a new record of 16,832.62, while the S&P 500 reached a fresh high of 5,321.41. This marks a significant milestone as both indexes continue to benefit from strong investor interest in technology and artificial intelligence.
  • Dow Jones Posts Modest Gains: The Dow Jones Industrial Average closed 0.17% higher at 39,872.99, showcasing restrained optimism among investors despite the broader market rally driven by tech stocks.
  • Russell 2000 Outperforms: The Russell 2000 index has risen 6.2% in May, outpacing the S&P 500’s 5.5% rise, highlighting a strong performance in smaller-cap stocks during the month.
  • European Markets Close Lower: The Stoxx 600 index closed down 0.21% on Tuesday, with food and beverage stocks falling 0.83% and mining stocks rising 0.75%, reversing the positive sentiment seen earlier in the week. The FTSE 100 Index is down 7.75 points or 0.09%
  • Hong Kong’s Hang Seng Index Leads Asian Declines: The Hang Seng index dropped about 2%, while mainland China’s CSI300 fell 0.4% to 3,676.16. South Korea’s Kospi decreased 0.65% to 2,724.18, and Japan’s Nikkei 225 ended down 0.31% at 38,946.93.
  • Cryptocurrencies Rally: Ether surged 8.8% to $3,747 following a 20% rise on renewed ETF optimism. Bitcoin climbed 2% to about $70,000, extending its gains from the previous day.
  • Treasury Yields Pull Back: The yield on the 10-year Treasury dropped more than 2 basis points to 4.412%, and the 2-year Treasury yield slipped to 4.831%, as investors weighed inflation and interest rate outlooks.
  • Oil Prices Drift Lower: Crude oil futures drifted lower Tuesday, with West Texas Intermediate (WTI) June contract down 54 cents, or 0.68%, to $79.26 a barrel. Brent July contract fell 83 cents, or 0.99%, to $82.88 a barrel. Year-to-date, WTI is up 10.62%, while Brent is up 7.58%. Both benchmarks have traded within a $3 range this month, reflecting a lack of major market catalysts.

FX Today:

  • EUR/USD Steady Amid Market Mood: The EUR/USD pair hovered around the 1.0850 mark for a second consecutive day on Tuesday, with the US Dollar ticking higher amid a souring market mood. The pair remained within a narrow range, supported at 1.0830, 1.0795, and 1.0750, with resistance levels at 1.0890, 1.0920, and 1.0960. Technical indicators suggest a neutral to slightly bearish outlook, with the pair developing below the 20-day SMA but remaining above longer moving averages.
  • USD/JPY Sideways Below 156.50: The USD/JPY pair remained upward biased but struggled to gain momentum, trading just below the 156.50 resistance level. Key resistance levels to watch are 156.76, 157.00, and the May 1 high of 157.98, while support levels are 156.00, 155.61, and 155.18, indicating potential for a near-term consolidation.
  • USD/CAD Gains on CPI Data: USD/CAD rose to its highest bids in a week, approaching the 50-day EMA at 1.3636. The pair remains down from last month’s peak near 1.3850 but has found a long-term technical floor at the 200-day EMA from 1.3549. The recent cooling in Canadian CPI inflation supported the pair’s upward movement.
  • AUD/USD Holds Key Support: The AUD/USD pair traded between key support at 0.6635-0.6648 and overhead resistance at 0.66759-0.6690. A break above 0.6690 could see continued momentum up to 0.6728-0.6738, while a fall below 0.6635 may lead to short-term selling pressure as buyers exit long positions.
  • Gold Prices Retreat: Gold’s uptrend saw a pullback, with prices potentially forming a ‘dark cloud cover’ pattern if they close below the May 20 low of $2,407. Resistance levels are at $2,431 and the all-time high of $2,450, while support levels are at $2,400, $2,332, and $2,303. The 50-day SMA at $2,284 could be the next support if further declines occur.

Market Movers:

  • Tesla Surges on Shareholder Action: Tesla shares closed up more than 6%, leading gainers in the Nasdaq 100. This surge came because a coalition of Tesla shareholders urged peers to reject CEO Elon Musk’s $56 billion pay package and vote against the re-election of two directors, citing concerns about the board’s effectiveness.
  • Peloton Plunges Amid Refinancing Plans: Peloton’s stock plunged 16.37% following the company’s announcement of a “global refinancing” process, including a convertible notes offering and a $1 billion five-year term loan. This comes amid a restructuring plan as Peloton continues to grapple with falling sales.
  • Nvidia Shares Surge Ahead of Earnings Report: Nvidia shares advanced 0.6% on Tuesday, with a staggering 92% increase in 2024 and a 205% rally over the past 12 months. The anticipation of strong earnings has positioned Nvidia at the centre of the AI-driven market enthusiasm.
  • Macy’s Rises on Upgraded EPS Forecast: Macy’s shares rose more than 5% after the company raised its full-year adjusted EPS estimate to $2.55-$2.90 from a previous estimate of $2.45-$2.85. This optimistic forecast reflects better-than-expected performance.
  • Eli Lilly Gains on Drug Approval: Eli Lilly’s stock increased by over 2%, reaching a record high after receiving approval for its diabetes drug tirzepatide in China. Additionally, Eli Lilly announced a partnership with Atkis Oncology to develop tumour-targeting radiopharmaceuticals.
  • AstraZeneca Climbs on Revenue Projections: AstraZeneca shares climbed more than 2% following the company’s projection of delivering $80 billion in total revenue by 2030, driven by significant growth in its oncology, biopharmaceuticals, and rare disease portfolios.
  • IBM Up on Salesforce Partnership: IBM saw its shares rise more than 2%, leading gainers in the Dow Jones Industrials. The increase followed news of IBM expanding its partnership with Salesforce to enhance AI and data ecosystems.
  • Nordson Falls on Weak Sales Forecast: Nordson’s shares dropped more than 9%, leading declines in the S&P 500. The company reported Q2 sales of $650.6 million, missing the consensus estimate of $661.4 million, and provided a Q3 sales forecast of $645 million-$670 million, well below the consensus of $705.3 million.
  • Keysight Technologies Slumps on EPS Forecast: Keysight Technologies fell more than 8% after forecasting Q3 adjusted EPS of $1.30-$1.36, below the consensus estimate of $1.45.
  • Walgreens Declines on Store Closures: Walgreens shares declined more than 6%, leading losers in the Nasdaq 100, following a Wall Street Journal article detailing the impact of the “retail apocalypse” on national drugstore chains, with Walgreens closing hundreds of stores.
  • Palo Alto Networks Drops on Billing Forecast: Palo Alto Networks shares dropped more than 3% after the company forecast Q4 billings of $3.43 billion-$3.48 billion, with the midpoint below the consensus of $3.47 billion. This decline also affected other cybersecurity stocks, with Fortinet and Zscaler both closing down more than 1%.
  • Urban Outfitters Soars on Strong Earnings: The clothing retailer’s shares rose nearly 8% after beating estimates on its first-quarter results, reporting adjusted earnings of 69 cents per share on $1.2 billion of revenue, surpassing the consensus of 52 cents per share on $1.18 billion of revenue.
  • Viasat Plummets on Wider Loss: Viasat shares fell nearly 13% after reporting a fiscal fourth-quarter loss of 80 cents per share, worse than the expected loss of 63 cents per share. However, the company’s revenue of $1.15 billion beat expectations of $1.09 billion.
  • Haemonetics Falls on Note Offering: Shares of Haemonetics dropped 8% following the announcement of a proposed private offering of $525 million worth of convertible senior notes due in 2029.
  • Toll Brothers Rises on Strong Earnings: The homebuilder’s shares increased by more than 1%, reporting fiscal second-quarter earnings of $4.55 per share on revenue of $2.65 billion, beating the consensus estimates of $4.14 per share and $2.53 billion in revenue.
  • XP Slides on Missed Revenue: XP shares slid 4% after reporting first-quarter net revenue that narrowly missed consensus expectations. Total net inflows were also slightly down from the previous year.
  • Modine Manufacturing Drops on Revenue Miss: Modine shares shed nearly 8%, with fiscal fourth-quarter revenue of $603.5 million falling short of the $605.4 million expected by analysts.

As the market closes on a high note with the S&P 500 and Nasdaq reaching new record highs, driven by enthusiasm around Nvidia and artificial intelligence, investors remain cautiously optimistic. Despite sectoral shifts and mixed economic signals, the tech rally continues to lift overall market sentiment. While European markets showed a reversal of positive momentum and Asian markets experienced a downturn led by Hong Kong’s Hang Seng, the resilience of key US indices shows some broader confidence in the tech sector’s growth potential. With upcoming Federal Reserve commentary and Nvidia’s earnings report on the horizon, market participants are poised for potential volatility, balancing optimism with a keen awareness of underlying economic uncertainties.