The S&P 500 rose on Thursday to mark its fourth consecutive record close, driven by data suggesting that inflationary pressures may be easing. Alongside this, the Nasdaq Composite also set a new record, reflecting strong investor confidence. This positive market movement follows recent producer price index data showing an unexpected decline, which boosted hopes for a cooling inflation trend. The Federal Reserve’s decision to hold interest rates steady and reduce its rate cut expectations for 2024 further contributed to the optimistic market sentiment, setting the stage for continued upward momentum in equities.

Key Takeaways:

  • S&P 500 Sets Fourth Consecutive Record Close: The S&P 500 rose 0.23% to close at 5,433.74, marking its fourth straight record close. This upward momentum was driven by easing inflation data and positive investor sentiment following the Federal Reserve’s policy decision.
  • Nasdaq Composite Hits New High: The Nasdaq Composite advanced 0.34% to end at 17,667.56, achieving its fourth consecutive record close. Investor enthusiasm was bolstered by strong performance in technology stocks and signs of cooling inflation.
  • Dow Jones Industrial Average Underperforms: The Dow Jones Industrial Average slipped 0.17%, closing at 38,647.10. Despite this decline, the overall market sentiment remains positive due to favourable inflation data and the Fed’s dovish stance.
  • Producer Price Index Declines Unexpectedly: May’s producer price index fell 0.2% from the prior month, against economists’ expectations of a 0.1% increase. This decline supports the view that inflationary pressures are easing.
  • Treasury Yields Slide Again After PPI Fell in May: US Treasury yields slipped once again on Thursday after the latest inflation data showed an unexpected drop. The rate on the 10-year Treasury fell 5 basis points to 4.242%, hitting its lowest level since April 1. The 2-year Treasury yield also declined 6 basis points to 4.691%.
  • European Markets React to US Inflation Data: The Stoxx 600 closed down 1.3%, the FTSE 100 decreased by 0.63% to 8,163.67, and the CAC 40 fell 2.12% as investors assessed US inflation data and the Fed’s policy stance. Auto stocks led the decline, dropping 2.3% after the European Union announced plans to impose higher tariffs on Chinese electric vehicle makers. Additionally, a UK probe into emissions claims added to the sector’s woes. Shares of Atos dropped 14% before bouncing back, while Wise’s stock tumbled 15% after lowering growth and margin guidance.
  • Asia-Pacific Markets Mostly Rise: South Korea’s Kospi gained 0.98% to close at 2,754.89, and Hong Kong’s Hang Seng index rose 0.87%, driven by gains in electric vehicle stocks despite EU tariffs. The mainland Chinese CSI 300 reversed earlier gains, losing 0.51%, while Japan’s Nikkei 225 fell 0.4% to 38,720.47. Australia’s S&P/ASX 200 rose 0.44% to 7,749.7, rebounding from two days of losses. Despite mixed regional performance, the overall market sentiment in Asia-Pacific was positive following the Fed’s rate decision.
  • Oil Prices Hold Steady Amid Easing Inflation: Crude oil futures held firm with the West Texas Intermediate July contract closing at $78.62 per barrel and Brent August contract at $82.75 per barrel. Both benchmarks are up significantly year to date.

FX Today:

  • EUR/USD Declines Amid Fed’s Rate Cut Pushback: The EUR/USD pair fell to 1.0740 after touching a three-day high near 1.0850. The pair’s near-term outlook improved with a break above the Symmetrical Triangle chart formation, targeting a potential two-month high around 1.0900. However, long-term uncertainty persists as the pair hovers near the 200-day EMA, trading around 1.0800.
  • GBP/USD Struggles Below 1.2800: GBP/USD traded down 0.25%, settling around 1.2765, continuing its trend below the 1.2800 mark for the ninth consecutive trading day. Key support lies at the recent low of 1.2687, with further levels at the 100-day moving average (1.2643) and 50-DMA (1.2610).
  • USD/JPY Consolidates Around 157.00: USD/JPY trades at 157.08, showing consolidation around this level. A rise past 157.20 could target the April 26 high of 158.44, with further upside potential towards the year-to-date high of 160.32. On the downside, support is seen at 156.00 and the June 12 low of 155.72, potentially leading to 154.00 and 153.35/40.
  • USD/CAD Rises Above 1.3750: USD/CAD climbed over 1.3750 as the US Dollar strengthened against the Canadian Dollar. The pair is approaching the week’s peak near 1.3790, with fresh bids aiming to recapture the 1.3800 handle. Short positions target the 50-day EMA at 1.3668 for potential downward movement.
  • EUR/GBP Falls to 22-Month Low: The EUR/GBP pair declined to 0.8400, marking a fresh 22-month low. Bearish momentum intensified as the pair broke through technical support at 0.8500, now heading towards the 0.8400 level. Major resistance is positioned further down at 0.8300.
  • EUR/JPY Eyes Further Downside: EUR/JPY experienced a 0.45% loss, trading at 168.60 after reaching a daily high of 170.13. The pair is under pressure as the RSI indicates increased seller momentum, with potential support at the 50-DMA of 167.47. Further declines could see the pair dipping into the Kumo, targeting 165.92 and 164.78.
  • Gold Prices Retreat Amid Fed’s Hawkish Stance: Gold prices fell after reaching a daily high of $2,326. The metal faces support at $2,300, with further levels at $2,277 and $2,222. On the upside, a break above the June 7 cycle high of $2,387 could pave the way towards the $2,400 mark.

Market Movers:

  • Broadcom Surges on Strong Earnings and Stock Split: Broadcom shares soared around 12% after the company reported fiscal second-quarter earnings and revenue that exceeded expectations. Adjusted earnings per share came in at $10.96, while revenue reached $12.49 billion, surpassing analysts’ estimates of $10.84 per share and $12.03 billion, respectively. The company also announced a 10-for-1 stock split, boosting investor confidence.
  • Signet Jewelers Plummets on Mixed Earnings: Signet Jewelers’ shares dropped nearly 15% following the release of mixed first-quarter earnings results. The company posted adjusted earnings of $1.11 per share and revenue of $1.51 billion, falling short of analysts’ revenue expectations of $1.52 billion. The management highlighted ongoing consumer pressure and increased discount activity in the jewellery market.
  • Dave & Buster’s Falls on Revenue Miss: Dave & Buster’s shares declined almost 11% after the company reported first-quarter revenue of $588 million, missing analysts’ expectations of $621 million. This shortfall led to a significant drop in the stock, reflecting concerns over the company’s performance.
  • Virgin Galactic Plunges on Reverse Stock Split Announcement: Virgin Galactic shares plunged more than 14% after the company’s board of directors approved a 1-for-20 reverse stock split, set to take effect after market close on June 14. The stock, trading under $1, faced significant selling pressure following the announcement.
  • Ford Motor Dips After Ending EV Dealership Program: Ford Motor shares dipped more than 1% after the automaker announced the termination of an expensive electric vehicle dealership program. The program required U.S. dealers to invest upwards of $1 million to sell EVs, and its discontinuation reflects the company’s shift in strategy.
  • NextEra Energy Partners Downgraded, Shares Fall: NextEra Energy Partners’ stock fell 7% after Barclays downgraded the company to underweight from equal weight. The firm cited an overhang from convertible equity portfolio financing and a lack of clear solutions as reasons for the downgrade.
  • Paramount Global Declines on Merger Halt: Paramount Global shares slumped nearly 7%, extending a difficult week for the company. Earlier in the week, National Amusements halted merger discussions between Paramount Global and Skydance, leading to a weekly decline of over 13%.
  • Warner Bros. Discovery Sinks on Formula E Stake Sale: Warner Bros. Discovery shares dropped 6.7% after the announcement that Liberty Global would acquire its shares in Formula E. The transaction, expected to close by the year-end, will increase Liberty’s ownership stake to 65%, giving it a controlling interest in the series.
  • Generac Loses Ground on Downgrade: Generac shares fell 4.6% after Janney Montgomery Scott downgraded the company to neutral from buy. The downgrade was attributed to concerns over valuation and the need for additional clarity on the rollout of updated energy technology products post-2025.
  • Adobe Jumps on Strong Earnings: Adobe shares surged 15% in extended trading after the company reported earnings and revenue that exceeded estimates. Adobe’s revenue grew 10% year over year for the quarter ending May 31, reflecting strong demand for its design software.

The record highs of the S&P 500 and Nasdaq Composite underscore a growing optimism driven by cooling inflation data and the Federal Reserve’s steady interest rate policy. Despite the Dow Jones Industrial Average lagging slightly, the overall sentiment remains high with Broadcom’s strong earnings and significant stock split announcement leading tech gains. However, mixed earnings reports from companies like Signet Jewelers and Dave & Buster’s highlight ongoing challenges in the consumer sector. Globally, European and Asia-Pacific markets presented a mixed picture as investors digest U.S. inflation trends and monetary policy adjustments. Amid these dynamics, it is clear that the market reflects a readiness to navigate the complex relationship of economic indicators and corporate performance in the coming weeks.