Despite concerns over a softening US economy, the S&P 500 and Nasdaq Composite closed at new record highs on Friday, driven by renewed optimism for potential interest rate cuts from the Federal Reserve. The latest jobs report, which showed a stronger-than-expected increase in nonfarm payrolls and a slight rise in the unemployment rate, bolstered investor sentiment. As treasury yields fell and major tech stocks like Tesla and Apple surged, the market reflected a cautious yet hopeful outlook. This rally signifies strong investor confidence in the face of economic challenges, highlighting the pivotal role of tech advancements and monetary policy expectations.

Key Takeaways:

  • S&P 500 Hits New Record Close Amid Rate Cut Hopes: The S&P 500 advanced 0.54% to close at a new high of 5,567.19, marking its 34th record close in 2024. The index has gained 16.7% year-to-date, reflecting strong investor optimism.
  • Nasdaq Composite Surges on Tech Rally: The Nasdaq Composite rose 0.90% to end at 18,352.76, driven by significant gains in tech stocks like Tesla and Apple. The Nasdaq’s year-to-date gain now stands at 22.3%.
  • Dow Jones Posts Modest Gains: The Dow Jones Industrial Average added 0.17%, or 67.87 points, to close at 39,375.87. Despite being the smallest gainer among the major indexes, the Dow still demonstrated investor confidence.
  • Labour Market Data Fuels Rate Cut Speculation: Nonfarm payrolls increased by 206,000 in June, surpassing expectations of 200,000, while the unemployment rate rose slightly to 4.1%. This data has increased the odds of a September interest rate cut to 77%, up from 64% a week ago.
  • Treasury Yields Decline on Economic Data: The yield on the 10-year Treasury fell by more than 6 basis points to 4.28%, while the 2-year Treasury yield declined nearly 8 basis points to 4.61%, reflecting market expectations for a potential Fed rate cut.
  • European Stocks React to UK Election Results: European stocks closed lower on Friday as investors digested the Labour Party’s landslide UK election victory. The FTSE 100 index closed 0.45% lower, while the broader pan-European Stoxx 600 index finished the week 0.22% lower. The CAC 40 dropped below 7,700 in the afternoon. However, the FTSE 350 household goods and home construction index ended the session 2.5% higher, lifted by news of the Labour Party’s win. 
  • Mixed Performances in Asia-Pacific Markets: Japan’s Nikkei 225 crossed the 41,000 mark for the first time, ending the day flat at 40,912.37 after a volatile session. The Topix also dropped 0.49%, snapping a five-day winning streak to close at 2,884.18. Japan’s household spending for May unexpectedly dipped 1.8% in real terms compared to the same period last year. Meanwhile, South Korea’s Kospi rose 1.32%, lifted by a strong performance from Samsung Electronics. The small-cap Kosdaq increased 0.79%. Hong Kong’s Hang Seng index dropped 1.13%, and mainland China’s CSI 300 fell 0.43%, while Australia’s S&P/ASX 200 dipped 0.12% to close at 7,822.3.
  • Oil Posts Fourth Straight Weekly Gain: US crude oil closed at $83.16 per barrel, down 0.86% for the day but up 16.1% year-to-date. Brent crude settled at $86.54 per barrel, down 1.02% for the day but ahead by 12.3% year-to-date. The market is tightening as summer fuel demand picks up, with US crude inventories declining by 12.2 million barrels and gasoline stocks falling by 2.2 million barrels last week.
  • Cryptocurrency Market Faces Volatility: Bitcoin’s price fell more than 5%, while Ether dropped around 8%. This decline came amid concerns over the payout from the collapsed Mt. Gox bitcoin exchange, which wiped out over $170 billion in market capitalisation within 24 hours.

FX Today:

  • EUR/USD Churns After US NFP Sparks Rate Cut Hopes: EUR/USD reached 1.0840, climbing from early week lows near 1.0710. EUR/USD gained 1.25% from bottom to top through the week, marking seven consecutive trading days in the green. Bidders extended price action north of the 200-day Exponential Moving Average (EMA) at 1.0784, but a rough descending channel still prices in downside technical pressure just above 1.0860.
  • GBP/USD Continues Win Streak, Extends Rally Post-NFP: GBP/USD rallied back over the 1.2800 handle on Friday, driven by a broad-market risk appetite recovery fuelled by renewed rate cut hopes. GBP/USD scaled the 1.2800 handle, extending its win streak to seven consecutive trading days. The pair has gained 1.62% from its last swing low of 1.2613. Price action halted a decline into the 200-day EMA at 1.2608, with bids poised to challenge a supply zone above 1.2800.
  • USD/CAD Weakens After Canadian Jobs Data Fizzles: USD/CAD retested 1.3650, rising from a near-term floor just above the 1.3600 handle, as bidders look for a fresh break north of the 200-hour EMA at 1.3666. Daily candlesticks continue to hold above 1.3600, with a consolidation pattern building into the charts. Price action is squeezed by a supply zone above 1.3750 and a rising 200-day EMA at 1.3591.
  • AUD/JPY Bulls Pause, Pair Remains Steady: The AUD/JPY pair managed to close the week around the 108.50 level. This slight pullback, likely due to traders booking profits, did not diminish the pair’s bullish performance, closing the week up 1%. If corrective pressure arises, the pair could face support at the 108.00 mark and further down at 107.50 and 107.00 levels. The 104.90 (20-day SMA) level could serve as an additional support line.
  • NZD/USD Bulls Gaining Control: NZD/USD gained 0.40% to 0.6050 on Friday, closing above the 20, 100, and 200-day Simple Moving Averages (SMA). Resistance lies at the 0.6150-0.6170 zone and above at the 0.6200 level. A firm break above these levels could confirm recent bullish dominance, driving the pair into bullish territory. On the downside, immediate support lies near the 20-day SMA at 0.6120 and below at the crucial 0.6070 mark. If sellers drive the price lower, it would indicate strengthening selling pressure and the possibility of a deeper downward correction.
  • Gold Rises Sharply to Six-Week High: The XAU/USD trades at $2,391, registering gains of over 1.40% for the day and more than 2.70% for the week. A daily close above $2,368 could open the door for a higher trading range within the $2,370-$2,400 area, with buyers targeting higher prices. If the price breaks above $2,400, it will expose the year-to-date high of $2,450 before challenging $2,500. Conversely, if sellers drive the spot price below $2,350, further declines could target the $2,300 level. If this support fails, the next demand zone would be $2,277, followed by $2,222.
  • Silver Skyrockets Above $31.00, Eyes Further Gains: The XAG/USD climbed to $31.20, a gain of 2.65%. For a bullish continuation, the first resistance is at the $31.50 psychological mark, followed by the $32.00 figure. Next up would be the year-to-date high of $32.51. On the downside, if XAG/USD slips past $31.00, the first support is at $30.18, ahead of $30.00. Further losses could see support at $29.48, and below that at $29.00.

Market Movers:

  • Tesla Soars on Strong Weekly Performance: Tesla shares rose more than 2% on Friday, contributing to a remarkable week-to-date gain of approximately 27%. The stock’s surge was driven by positive market sentiment and strong investor interest in the electric vehicle maker.
  • Apple Hits New All-Time High: Apple shares jumped over 2%, setting a new all-time high. The tech giant continues to benefit from strong product demand and positive market conditions, further boosting its market capitalization.
  • Nvidia Drops on Rare Wall Street Downgrade: Nvidia shares slid nearly 2% after New Street Research downgraded the stock from buy to hold, citing limited upside given its significant run-up this year. Despite the downgrade, Nvidia remained up about 1.9% for the week.
  • Macy’s Jumps on Increased Buyout Offer: Shares of Macy’s surged 9.5% following a report by The Wall Street Journal that the investor group of Arkhouse Management and Brigade Capital Management raised its buyout offer to approximately $24.80 per share, up from $24 previously.
  • Crypto Stocks Tumble on Mt. Gox Payout News: Stocks tied to cryptocurrency plummeted after the trustee for the now-obsolete Mt. Gox exchange announced payouts in bitcoin and bitcoin cash to creditors. Marathon Digital fell nearly 4%, while Microstrategy and Coinbase were down about 1.6% and 0.6%, respectively. Conversely, Bitcoin miner Iris Energy gained 4.7%, reversing earlier losses, while CleanSpark fell 0.6% and Robinhood dropped 1%. Riot Platforms closed nearly 1% higher.
  • Chinese EV Stocks Fall on EU Tariffs: Shares of Chinese electric vehicle makers fell after the European Union confirmed increased tariffs on electric vehicles imported from China. Nio dropped more than 5%, Xpeng plunged 4.8%, Zeekr was down 8.7%, and Geely and Li Auto fell about 4.4% and 1.3%, respectively.
  • Novo Nordisk Edges Higher Despite Health Concerns: Shares of Novo Nordisk rose 2.5% despite concerns that semaglutide, present in its drugs Ozempic and Wegovy, might be tied to a rare eye disease. Deutsche Bank analyst Emmanuel Papadakis stated that the study results were “hardly a game-changer.”

The record highs of the S&P 500 and Nasdaq Composite underscored the market’s optimism amid economic uncertainties. With the labour market showing resilience through higher-than-expected job additions and the unemployment rate inching up, hopes for a Federal Reserve rate cut intensified. The rally in major tech stocks, alongside declines in certain sectors, highlighted the market’s selective confidence. European markets reacted to political shifts, while mixed performances in Asia reflected regional economic variances. The volatility in the cryptocurrency market and movements in commodities like oil and gold added further layers of complexity to the investment landscape.