The S&P 500 and Nasdaq reached record highs on Monday, reflecting strong investor confidence ahead of crucial inflation data and the release of second-quarter earnings reports from major financial and consumer companies. The broad market index showed modest gains, while the Nasdaq’s advance was driven by optimism surrounding potential Federal Reserve interest rate cuts amidst easing inflation signals. Despite a slight dip in the Dow Jones Industrial Average, overall market sentiment remained positive, underscored by expectations that upcoming economic data and earnings announcements will provide further insights into the sustainability of this year’s market rally.

Key Takeaways:

  • S&P 500 and Nasdaq Hit Record Highs: The S&P 500 closed up 0.1% at 5,572.85, while the Nasdaq Composite rose 0.28% to 18,403.74. This marks new all-time highs for both indexes, driven by hope about potential Federal Reserve interest rate cuts and solid economic growth.
  • Dow Jones Dips Slightly: The Dow Jones Industrial Average finished the day 31 points lower, or 0.08%, at 39,344.79. Despite this minor decline, the index has overall shown resilience amid broader market optimism.
  • European Markets Close Mixed Amid French Election Results: The pan-European STOXX 600 was flat, with the U.K.’s FTSE 100 down 0.1% and Germany’s DAX also remaining flat. The CAC 40 in France fell 0.6% following a volatile trading day due to the left-wing’s unexpected parliamentary election win. The New Popular Front’s victory led to concerns about the coalition’s fiscally aggressive spending and taxation plans, which could lead to political paralysis.
  • Asian Markets Mostly Lower: Japan’s Nikkei 225 fell 0.32% to 40,780.7, and the Topix declined 0.57% as real wages dropped for the 26th straight month, despite nominal wages rising 1.9% to 297,151 yen ($1,850), marking the fastest wage increase in 11 months. South Korea’s Kospi decreased by 0.16%, while the small-cap Kosdaq climbed 1.39%. Hong Kong’s Hang Seng index fell 1.68%, and the mainland Chinese CSI300 slid 0.85% to close at 3,401.76, marking its fifth consecutive day of losses and its lowest level since February. Australia’s S&P/ASX 200 finished 0.76% lower at 7,763.2, marking a second straight day of losses.
  • US 10-Year Treasury Yield Remains Steady: The 10-year Treasury yield was little changed at 4.273%, while the 2-year Treasury yield increased by 3.2 basis points to 4.629%. Investors are looking ahead to key inflation data due later this week.
  • Germany’s Bitcoin Sales Impact Market: Germany sold 2,739 bitcoins, worth $155 million, contributing to a significant sell-off in the cryptocurrency market. Bitcoin’s price fell below $55,000, its lowest level since February 2024.
  • Crude Oil Prices Fall: US crude oil futures dropped 1%, with the West Texas Intermediate August contract closing at $82.33 per barrel and Brent September contract at $85.75 per barrel. This decline is attributed to the impact of Tropical Storm Beryl on Gulf Coast refining and production.

FX Today:

  • Gold Price Plummets as US Yields Drop: The XAU/USD price fell from $2,392 to $2,357, opening the door for consolidation. The Relative Strength Index (RSI) is decelerating toward the 50-neutral line, indicating fading buyer momentum. If XAU/USD drops below $2,350, further declines could target $2,300. Should this support fail, the next demand zones are $2,277 and $2,222. Conversely, if gold prices climb above $2,400, the next resistance lies at $2,450, ahead of the $2,500 mark.
  • EUR/USD Trims Gains and Snaps Seven-Day Win Streak: EUR/USD fell on Monday after the coalition minority government win in France prevented a financially-disastrous far-right party from taking leadership, but the win was not decisive, leading to policy deadlock. EUR/USD struggled to breach above 1.0840, with bulls running out of steam as the 200-hour Exponential Moving Average (EMA) rose to 1.0780, providing a floor for intraday price action. 
  • GBP/USD Falls Back from Brief Peaks: GBP/USD briefly tested a fresh four-week high on Monday, crossing above 1.2840 before broad-market flows dragged the pairs back down to the week’s opening bids just above 1.2800. The pair rallied towards 1.2600 but failed to breach June’s peak at 1.2860. GBP/USD remains above the 200-hour EMA at 1.2735, with bullish daily candles showing potential for a bearish turnaround within a heavy supply zone above 1.2800. Price action has stayed north of the 200-day EMA at 1.2609.
  • NZD/USD Price Analysis: Bears Test Critical Support of 20-Day SMA: NZD/USD lost 0.30% to 0.6125 on Monday, erasing its daily gains but successfully defending its position above the 20-day Simple Moving Average (SMA) support level at 0.6120. Immediate resistance is at 0.6170, followed by 0.6200. A firm break above these levels confirms recent bullish momentum. Immediate support lies near the 20-day SMA at 0.6120, with stronger support at 0.6070. 
  • USD/JPY Struggles at Key Resistance: USD/JPY consolidated below the psychological 161.00 figure as US Treasury bond yields edged lower and the Greenback weakened. The pair is expected to consolidate within the 160.00-162.00 range, with the RSI flat in bullish territory. If buyers reclaim 161.00, the pair could move towards 161.95 and later 164.87. Conversely, a drop below 160.22 would bring support at 159.68, with further testing at 158.25 and 156.91.
  • AUD/NZD Sees Slight Uptick Ahead of RBNZ Decision: AUD/NZD opened the week mildly higher at around 1.0990. The pair maintains a bullish stance, although nearing overbought conditions warrant caution. The RSI is close to 70, and the MACD shows rising green bars. Support levels lie at 1.0950, 1.0930, and 1.0900. Buyers are eyeing 1.1000 as the next resistance target. A correction may be on the horizon, but as long as AUD/NZD stays above the 20, 100, and 200-day SMAs, the outlook remains favourable.

Market Movers:

  • Paramount Global Drops on Merger Announcement: Shares of Paramount Global fell 5.3% after announcing an $8 billion merger with Skydance Media. Skydance and its financial backers will invest heavily in Paramount and acquire National Amusements, Paramount’s controlling shareholder, leading to a significant shake-up in the media and entertainment sector.
  • Morphic Holding Soars on Acquisition News: Morphic Holding’s shares surged 75% following the announcement of its $3.2 billion acquisition by Eli Lilly. This deal gives Eli Lilly access to Morphic’s portfolio of treatments in development, including those for ulcerative colitis and Crohn’s disease. Shares of Eli Lilly also rose 0.4% on the news.
  • Ideaya Biosciences Rallies on Positive Trial Results: Ideaya Biosciences saw its stock jump 15.3% after announcing positive results from the phase 2 trial of its cancer treatment. The monotherapy expansion dose is being developed for patients with urothelial and non-small cell lung cancers, signaling strong future potential for the company’s oncology pipeline.
  • SolarEdge Gains on Analyst Upgrade: SolarEdge shares rose 9.3% after Bank of America upgraded the stock to neutral from underperform, citing an attractive entry point. The firm noted it is waiting for a “more tangible path for margin and cash flow recovery” but sees potential upside in the current market conditions.
  • Corning Boosts Guidance, Shares Pop: Corning’s shares increased by 12% after the company raised its second-quarter core sales guidance to $3.6 billion from $3.4 billion. The company also expects its core earnings per share to be at the high end of or slightly above the guidance range of 42 cents to 46 cents, highlighting strong operational performance.
  • ServiceNow Falls on Downgrade: ServiceNow’s stock dropped 5% after Guggenheim downgraded shares to a sell rating, expressing doubts over expectations for an uptick in its artificial intelligence business in the second half of the year. The downgrade reflects concerns about the company’s growth prospects in the AI sector.
  • Columbia Sportswear Climbs on Upgrade: Columbia Sportswear shares gained 4.5% after Stifel upgraded the stock to buy from hold. The firm highlighted positive revenue inflection potential as trends such as outdoor participation and a focus on health and wellness grow, indicating strong future demand for Columbia’s products.
  • Gilead Sciences Upgraded, Shares Rise: Gilead Sciences saw its stock rise 1.3% after Raymond James upgraded the company to outperform from market perform. The upgrade was based on the biotech company’s strong drug pipeline and potential for multiyear growth, bolstering investor confidence in Gilead’s future prospects.

As the market eagerly awaits key inflation data and earnings reports from major financial and consumer companies, the record highs in the S&P 500 and Nasdaq reflect a slightly hopeful sentiment among investors. Despite minor dips in the Dow Jones and mixed performances in European and Asian markets, the overall outlook remains positive, lifted by the potential for Federal Reserve interest rate cuts and robust economic growth. The fluctuations in the currency and commodities markets, alongside significant corporate movements, highlight the dynamic nature of the current financial landscape. Investors are closely watching for further economic indicators and corporate earnings results to decide the sustainability of the recent market rally and navigate the challenges and opportunities that lie ahead.