Markets Soar to New Highs Amid Tech Rally and Economic Concerns

Vida Markets

Thursday 4th July 2024, 1:01 pm Time to read: 7 mins.

In a shortened trading session ahead of the Independence Day holiday, the S&P 500 and Nasdaq Composite reached new record highs, driven by strong performances in the tech sector despite mixed economic signals. Both indexes saw significant gains, with notable contributions from Tesla and Nvidia, even as investors contended with weaker-than-expected private payroll growth and

In a shortened trading session ahead of the Independence Day holiday, the S&P 500 and Nasdaq Composite reached new record highs, driven by strong performances in the tech sector despite mixed economic signals. Both indexes saw significant gains, with notable contributions from Tesla and Nvidia, even as investors contended with weaker-than-expected private payroll growth and disappointing service sector activity. Meanwhile, the Dow Jones Industrial Average experienced a slight dip, impacted by a decline in UnitedHealth shares. Despite these challenges, the market found support in declining bond yields, fostering optimism that the Federal Reserve may soon cut interest rates.

Key Takeaways:

S&P 500 and Nasdaq Hit New Records: The S&P 500 rose 0.51% to close at 5,537.02, while the Nasdaq Composite surged 0.88% to end at 18,188.30. Both indexes achieved fresh all-time highs, driven by strong performances from megacap technology stocks such as Tesla and Nvidia.
Dow Jones Experiences Modest Decline: The Dow Jones Industrial Average fell by 23.85 points, or 0.06%, closing at 39,308.00. The index was weighed down by a nearly 1.7% drop in UnitedHealth shares.
Muted Trading Volume Due to Early Closure: Trading volume was lower than usual as the New York Stock Exchange closed early at 1 p.m. ET for the Independence Day holiday. The exchange will remain closed on Thursday.
Economic Data Indicates Slowing Growth: ADP data revealed that private payrolls grew by just 150,000 in June, missing expectations and marking the lowest monthly gain since January. Weekly jobless claims also came in higher than forecasted. Additionally, the Institute for Supply Management reported a contraction in the service sector.
Bond Yields Decline on Economic Concerns: The 10-year US Treasury yield dropped over 8 basis points to 4.352%, marking the second consecutive day of decline. The 2-year Treasury yield fell nearly 4 basis points to 4.698%, reflecting increased hopes that the Federal Reserve may soon cut interest rates.
US Factory Orders Decline: Factory orders in the US unexpectedly fell by 0.5% in May, indicating ongoing challenges in the manufacturing sector. Orders for non-defence capital goods excluding aircraft, a key measure of business spending, dropped 0.6%.
European Markets Close Higher: The pan-European Stoxx 600 rose 0.8%, with mining stocks leading the gains at 2.3%. Maersk shares increased by 3.8% after the company withdrew from sales talks with DB Schenker. Meanwhile, recent consumer price data from the euro zone showed headline inflation dipped to 2.5% in June, but core and services inflation remained high at 2.9% and 4.1%, respectively. The FTSE 100 Index is up 49.92 points or 0.61% and the CAC 40 Index gained 102 points or 1.35 percent.
Asian Markets Show Mixed Performance: Japan's Nikkei 225 increased by 1.26%, extending its run above the 40,000 mark, while the broad-based Topix ended up 0.54%. South Korea’s Kospi rose 0.47%, and the Kosdaq Index climbed 0.75%. Australia’s S&P/ASX 200 finished 0.28% higher at 7,739.9. In Hong Kong, the Hang Seng index was up 1.14%, boosted by gains in property stocks, while Mainland China's CSI 300 fell by 0.24%. In India, the BSE Sensex briefly crossed the 80,000 mark, reaching an all-time high, and the Nifty 50 also hit a record high of 24,307.25. Notably, HSBC reported a significant expansion in India’s private sector activity, with the composite PMI rising to 60.9 in June from 60.5 in May.


FX Today:

Oil Prices Hold Firm as Hurricane Fears Ease: Crude oil futures were little changed on Wednesday as fears that Hurricane Beryl could disrupt Gulf Coast refineries eased. West Texas Intermediate fell 13 cents to $82.68 per barrel, while Brent dropped 13 cents to $86.13 per barrel. Prices hit two-month intraday highs on Tuesday amid concerns that Beryl could impact Gulf Coast oil infrastructure. However, prices ultimately closed lower as the storm is expected to weaken into a tropical storm before potentially hitting south Texas as early as Sunday. 
Gold Attempting to Break Through 50-day SMA Following Powell Speech: Gold (XAU/USD) rallied into the $2,356 region as investors continued to digest the contents of Federal Reserve Chairman’s speech from Tuesday and the shift in monetary-policy stance that his words reflected. If the gold price clears the pattern’s neckline, it could sponsor a leg up to $2,400, paving the way for further gains and exposing the year-to-date high of $2,450. Conversely, if sellers push the spot price below $2,350, further downside is seen near $2,300. The next demand zone would be $2,277, followed by $2,222.
EUR/USD Increased Volatility Amid France’s Risks: This strong downtick in the Greenback also kept the bid bias around EUR/USD well in place, lifting spot back above the key 1.0800. Further upside could see EUR/USD revisit the July high of 1.0816, before the weekly top of 1.0852 and later 1.0916. The breakout of this level might bring the March high of 1.0981 back on the radar, ahead of the weekly top of 1.0998 and the psychological 1.1000 threshold. If bears regain control, the pair may hit 1.0666, and then 1.0649, and finally the 2024 bottom of 1.0601. So far, the 4-hour chart indicates a resurgence of the upside motivation. The initial resistance level is 1.0816, then 1.0852.
GBP/USD Surges Past 1.2750 as Buyers Gain Momentum: The GBP/USD trades at 1.2740, up 0.69%. The GBP/USD pushed through key resistance seen at 1.2700 and aimed toward technical resistance levels like 1.2777 and two key resistance trendlines, which converge at around 1.2760/1.2775. For a bullish continuation, the GBP/USD needs to clear 1.2775 so buyers can test 1.2800. A breach of the latter will expose 1.2860, ahead of the year-to-date high of 1.2894. On further weakness, if GBP/USD drops below 1.2750, the next demand area is seen at 1.2700. Once surpassed, the 50-day moving average (DMA) emerges as first support at 1.2662, followed by the 100-DMA at 1.2644.
Canadian Dollar Boosted by US Data Miss: USD/CAD volatility continues to litter the charts, with the pair declining back into familiar lows near 1.3630. Wednesday’s decline adds to earlier declines after an early week peak just below 1.3760. A supply zone is baked into the daily chart as candlesticks slump back below the 50-day Exponential Moving Average (EMA) at 1.3677. Buyers will be looking for a chance to re-up on an extended pullback to the 200-day EMA at 1.3588.
Yen Performance Fuels Continued AUD/JPY Uptrend: In Wednesday's session, the AUD/JPY pair elongated its upward trajectory, reaching new high points around 108.40, hence beating its record once again after crossing its 2007 highs of around 107.30. Should the pair face a correction pulling it beneath the 108.00 level, followed by the 107.00 mark, it could discover new support levels. Thus, the 104.90 (20-day SMA) level may act as another potential support line. 
Market Movers:

Paramount Global Surges on Merger News: Shares of Paramount Global surged nearly 7% after news broke that Skydance Media had reached a preliminary merger deal with controlling shareholder National Amusements. The significant development led to increased investor optimism, resulting in a substantial rise in Paramount Global's stock.
Tesla Jumps on Strong Delivery Report: Tesla's stock jumped 6.5%, continuing its upward trend and bringing its week-to-date gains to 24.5%. This rally came after the company reported better-than-expected deliveries in the second quarter. Following this news, Wedbush analyst Dan Ives raised his 12-month price target for Tesla from $275 to $300, implying a potential 30% gain from Tuesday’s close.
MGM Resorts International Rises on Positive Coverage: MGM Resorts International saw its shares rise 2.2% after BTIG initiated coverage of the casino operator with a buy rating and a price target suggesting nearly 23% upside from Tuesday’s close. BTIG's positive outlook highlighted MGM's diversification efforts as a key driver for future growth.
Constellation Brands Falls on Revenue Miss: Constellation Brands' shares fell 3.3% after the company reported first-quarter sales that slightly missed expectations. Although Constellation posted better-than-expected adjusted earnings per share of $3.57 compared to the $3.46 expected by analysts, its revenue of $2.66 billion fell short of the $2.67 billion estimate. The decline was further impacted by a 7% drop in sales from its smaller wine and spirits business, with shipment volumes and depletions decreasing by 5.1% and nearly 13%, respectively.
Metal ETFs Gain as Dollar Weakens: Metal ETFs, including silver, gold, and copper miners, rose on Wednesday as the U.S. dollar weakened following dovish remarks from Federal Reserve Chair Jerome Powell. Silver miners were up 4%, marking their best day since mid-May, while gold miners climbed 3.7%, the best performance since March. Copper miners also gained 3.5%, tracking their best day since mid-May.
Constellation Energy Climbs on Restart Talks: Constellation Energy's shares increased by around 2% after a Reuters report indicated the company is in discussions with Pennsylvania officials about potentially restarting part of its Three Mile Island facility. The talks, described as “beyond preliminary,” sparked investor interest and drove the stock price higher.
As trading volumes thinned ahead of the Independence Day holiday, the S&P 500 and Nasdaq Composite soared to new heights, underscoring investor confidence in the tech sector despite mixed economic signals. While the Dow Jones dipped slightly, significant gains in Tesla and Nvidia highlighted the market's resilience. European markets remained upbeat amid upcoming elections, and Asian markets displayed mixed performances as regional data provided a varied outlook. With oil prices stabilising and gold attempting a breakthrough, the market continues to navigate through economic uncertainties with a cautious yet hopeful stance.

 

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