(Bloomberg) — Stocks on Wall Street surged to all-time highs as bond yields dropped, leading traders to speculate about potential Federal Reserve rate cuts following Jerome Powell’s indication that the US is heading back towards disinflation.
For the first time ever, the S&P 500 closed above 5,500, continuing a strong rally in 2024 that has left analysts rushing to revise their forecasts. Tesla Inc. rose by 10%, leading the gains in large-cap stocks, while Nvidia Corp. struggled to gain momentum. The Nasdaq 100 also hit a record high, reaching the 20,000 mark.
Since the closing low in October 2022, the S&P 500 has gained over $16 trillion in value. Despite concerns, equities continue to defy pessimists due to strong corporate earnings, the hype around artificial intelligence, and expectations of lower interest rates. The absence of significant pullbacks has bolstered confidence among bulls that the rally is sustainable.
Lori Calvasina from RBC Capital Markets predicts that the S&P 500 will reach new highs by the end of the year, citing economic strength as outweighing market risks. She has raised her year-end target to 5,700 from 5,300, one of the highest targets on Wall Street, even though she acknowledges that the market may have overextended itself.
Deutsche Bank AG strategists anticipate a 13% increase in US earnings for the second quarter, driven by growth in large-cap and tech stocks. This would mark the sixth consecutive quarter of above-average earnings beats.
While the surge in US equities has drawn comparisons to previous boom-and-bust cycles on Wall Street, historical data suggests that the current situation is less extreme than past periods. The S&P 500 has seen an 85% increase since 2019, a fraction of the gains seen during major bull runs in the 20th century.
On the economic front, recent data showed an unexpected rise in job openings, indicating a possible reversal of the trend signaling a labor market slowdown, which could impact Fed policy decisions.
Looking ahead, Wall Street is preparing for a slew of economic data releases, including the highly anticipated US payrolls report on Friday.
Corporate Highlights:
- Novo Nordisk A/S and Eli Lilly & Co. faced pressure as President Joe Biden demanded price cuts on their drugs, while Lilly received US approval for an Alzheimer’s treatment.
- Lennar Corp. and D.R. Horton Inc. were downgraded by Citigroup Inc. due to concerns about a sluggish housing market.
- Paramount Global is in talks to sell its Black Entertainment Television network to buyers including BET CEO Scott Mills and Chinh Chu.
- Apple Inc. will have an observer role on OpenAI’s board following a recent agreement.
- Robinhood Markets Inc. is considering offering cryptocurrency futures in the US and Europe.
Key events this week:
- China Caixin services PMI, Wednesday
- Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
- US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
- Fed’s John Williams speaks, Wednesday
- UK general election, Thursday
- US Independence Day holiday, Thursday
- Eurozone retail sales, Friday
- US jobs report, Friday
- Fed’s John Williams speaks, Friday
Some major market movements:
- Stocks: S&P 500 rose 0.6%, Nasdaq 100 rose 1%, Dow Jones Industrial Average rose 0.4%, MSCI World Index rose 0.5%
- Currencies: Bloomberg Dollar Spot Index fell 0.2%, euro remained stable at $1.0746, British pound rose 0.3% to $1.2686, Japanese yen was unchanged at 161.46 per dollar
- Cryptocurrencies: Bitcoin fell 2.2% to $61,874.51, Ether fell 1.5% to $3,410.95
- Bonds: Yield on 10-year Treasuries declined three basis points to 4.43%, Germany’s 10-year yield remained stable at 2.60%, Britain’s 10-year yield dropped three basis points to 4.25%
This article was created with the help of Bloomberg Automation.
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