S&P 500 Hits 5,600 Mark in Longest Rally of Year

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The S&P 500 has reached an unprecedented milestone, breaking the 5,600 mark in its longest rally of the year. The surge was fueled by a strong performance from major technology companies. Despite Federal Reserve Chairman Jerome Powell’s testimony to Congress, traders remain optimistic about the possibility of rate cuts later this year. Powell’s remarks, which included indications that the Fed does not require inflation to fall below 2% before reducing rates, failed to dissuade these hopeful bets. Currently, market swaps are pricing in two Fed cuts for 2024, with increasing chances that the first may occur in September.

The S&P 500 climbed 1%, marking its seventh consecutive day of gains and its 37th record this year. Prominent performers included Nvidia Corp., which saw a rise of more than 2.5%, and Apple Inc., buoyed by plans to increase iPhone shipments by 10% in 2024. Meanwhile, a $39 billion sale of 10-year Treasury bonds ensured stability in the bond market, with 10-year yields declining slightly to 4.28%. The labor market has significantly cooled, but Powell reassured that commercial real estate does not pose a financial stability risk.

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Wall Street is now turning its attention to the upcoming consumer-price index report. The so-called core CPI, excluding food and energy, is anticipated to rise by 0.2% in June for the second consecutive month. Such minimal gains would be the most modest back-to-back increases since August and could solidify the Fed’s confidence in the inflation trajectory. Analysts believe this sets the stage for a potential rate cut in September.

In other corporate news, Microsoft Corp. successfully avoided a prolonged European Union antitrust probe into its cloud business by reaching a deal with an Amazon-backed trade lobby. Intuit Inc. announced it is cutting 1,800 jobs, aiming to replace lower-performing employees with new hires skilled in artificial intelligence. Advanced Micro Devices Inc. agreed to a $665 million acquisition of Silo AI, furthering its expansion into AI technology. Additionally, Archer-Daniels-Midland Co. has hired a new finance executive from 3M Co. to restore shareholder confidence after an accounting scandal.

The US Federal Trade Commission is reportedly preparing a lawsuit against the three largest pharmaceutical intermediaries over their rebate practices for insulin and other medications. Honeywell International Inc. has agreed to purchase Air Products and Chemicals Inc.’s liquefied natural gas process technology and equipment business for $1.81 billion in cash.

On the international front, markets await China’s trade data and the University of Michigan consumer sentiment report. Upcoming earnings reports from major financial institutions, including Citigroup, JPMorgan, and Wells Fargo, are also on the radar.

Despite recent market calm, experts predict an increase in volatility as the earnings season kicks off and political uncertainties surface. The options market is anticipating a potential 0.8% movement in the S&P 500 index following the consumer price report, which could be the largest fluctuation since mid-June.

In summary, the S&P 500’s recent achievements highlight the sustained strength of the US stock market, driven by significant advancements in the technology sector and growing investor confidence in the Federal Reserve’s management of inflation. Major corporations continue to adapt strategically to maintain their competitive edge, while market observers brace for possible shifts in market dynamics triggered by forthcoming economic data and earnings reports.