S&P 500 Surpasses 5,500 Milestone as Powell Highlights Inflation Progress

Vida Markets

Wednesday 3rd July 2024, 9:54 am Time to read: 6 mins.

The stock market witnessed significant gains as Federal Reserve Chair Jerome Powell emphasized notable progress in curbing inflation, although he indicated that the central bank is not yet ready to lower interest rates. The S&P 500 closed above the 5,500 mark for the first time, reflecting investor optimism. Meanwhile, the Nasdaq Composite reached a new

The stock market witnessed significant gains as Federal Reserve Chair Jerome Powell emphasized notable progress in curbing inflation, although he indicated that the central bank is not yet ready to lower interest rates. The S&P 500 closed above the 5,500 mark for the first time, reflecting investor optimism. Meanwhile, the Nasdaq Composite reached a new record high, propelled by a remarkable surge in Tesla's stock following its better-than-expected second-quarter deliveries. The Dow Jones Industrial Average also saw an uptick, adding to the positive sentiment. This rally, marked by record-breaking closes for both the S&P 500 and Nasdaq, highlights the market's enthusiastic response to encouraging economic signals and strong performance in the tech sector, despite ongoing concerns about inflation and interest rates.

Key Takeaways:

S&P 500 Breaks 5,500 Barrier: The S&P 500 gained 0.62% to close at 5,509.01, marking its first-ever finish above the 5,500 mark. This milestone reflects investor optimism fuelled by Federal Reserve Chair Jerome Powell's comments on inflation progress.
Nasdaq Composite Reaches Record High: The Nasdaq Composite surged 0.84%, ending the day at a record high of 18,028.76. The index was buoyed by a significant 10% jump in Tesla shares after the company reported better-than-expected second-quarter deliveries.
Dow Jones Records Modest Gains: The Dow Jones Industrial Average added 162.33 points, or 0.41%, to close at 39,331.85. Despite being the least impressive performer among the major indexes, the Dow still showed solid growth.
Treasury Yields Ease Following Powell’s Comments: The yield on the 10-year Treasury note fell nearly 5 basis points to about 4.428%, while the 2-year Treasury note yield decreased by 3.5 basis points to approximately 4.735%.
European Markets Decline Amid Core Inflation Concerns: The Stoxx 600 index fell around 0.4%, with notable declines in the FTSE 100 (0.6%), Germany's Dax (0.7%), and France's CAC 40 (0.3%). Spain's Ibex led the losses, dropping 1.3%. Despite headline inflation dipping to 2.5% in June, core inflation remained stubbornly high at 2.9%, and services inflation held steady at 4.1%. The mixed inflation data has investors speculating about future European Central Bank rate cuts, adding to market volatility.
Asian Markets Mixed as Japan Hits New Highs: Japan's Nikkei 225 rose 1.12% to close at a three-month high of 40,074.69, while the broader Topix index hit a 34-year high. South Korea's Kospi fell 0.84%, and the small-cap Kosdaq dropped 2.04% after inflation data showed a rate of 2.4% for June, missing expectations. Hong Kong's Hang Seng index was up 0.33%, lifted by gains in Longfor Group, while Mainland China's CSI 300 fell 0.18%. Australia's S&P/ASX 200 slipped 0.42% to 7,718.2 following the Reserve Bank of Australia's decision to hold interest rates steady at 4.35%.
US Crude Oil Pulls Back from Two-Month High: US crude oil prices retreated on Tuesday from a two-month high, closing at $82.81 per barrel, down 57 cents or 0.68%. Brent crude also fell, ending at $86.24 per barrel, down 36 cents or 0.42%. Traders are weighing the potential risks of conflict in Middle East and the threat of Hurricane Beryl impacting Gulf Coast refineries. Despite the pullback, US crude oil has gained 15.6% year to date, while Brent is up 12%.

FX Today:

Gold Eases Amid Lower US Yields: The XAU/USD pair traded at $2,324, down 0.28%, as gold prices softened in response to declining US Treasury yields and a weaker dollar. Gold remains biased towards an upward trend but is currently near the $2,320-$2,350 range. Sellers need to push prices below $2,300 to continue the bearish momentum, targeting support levels at $2,277 and $2,222. On the upside, breaking through $2,350 could see gold reaching resistance at $2,387 and potentially $2,400.
Silver Rises with Emerging 'Double Bottom': Silver prices increased slightly, closing at $29.51, up more than 0.20%. The XAG/USD pair is showing a potential 'double bottom' chart pattern. To confirm this bullish trend, silver needs to surpass the resistance level of $29.50. If successful, the next targets are the neckline at $30.84 and $32.29. Failure to hold above $29.00 could lead to support tests at $28.57 and $27.59.
Australian Dollar Holds Steady Amid RBA Decisions: The AUD/USD pair has been trading sideways since mid-May, with strong support at the 20-day SMA of 0.6640 and additional support at 0.6620 and 0.6600. Key resistance levels are at 0.6660, 0.6690, and 0.6700, suggesting the pair will continue to range between 0.6600 and 0.6700 following the Reserve Bank of Australia's decision to keep interest rates steady at 4.35%.
Canadian Dollar Recovers Despite PMI Miss: The USD/CAD pair fell below the 1.3700 mark after hitting a near-term peak of 1.3755 earlier this week. The pair remains volatile, currently trading around the 50-day EMA at 1.3680. Although it stays above the 200-day EMA at 1.3588, bullish momentum has diminished since the April peak near 1.3850.
USD/CHF Hits Five-Week High: The USD/CHF extended its rally, closing at 0.9042, above its opening price of 0.20%. The pair has recovered more than 2.20% since hitting a three-month low of 0.8826, surpassing key technical levels such as the 200-day and 100-day DMAs at 0.8895 and 0.8982, respectively. Continued strength could see the pair challenge the 0.9050 psychological level, with the next target at 0.9158. Initial support lies at the 50-DMA of 0.9029.
NZD/JPY Stabilizes Around 98.00: The NZD/JPY traded neutrally around 98.00 as the bullish momentum paused. The daily RSI, which approached overbought levels, has declined, indicating a potential cooldown. Immediate support is seen at 97.50 and near the 20-day SMA at 97.00. Buyers need to defend these levels to aim for new highs.
Market Movers:

Tesla Surges on Strong Deliveries: Tesla's stock soared 10.2% after the electric vehicle company reported second-quarter deliveries of 443,956 vehicles, exceeding analysts' expectations of 439,000. This significant beat reflects a 4.8% year-over-year decline but a notable 14.8% increase from the first quarter, driving investor confidence and boosting the Nasdaq Composite.
Polestar Declines on Widened Loss: Polestar shares fell 1.2% following the announcement of a first-quarter loss of $274.3 million, up from $37.7 million a year ago. Despite reporting an 80% increase in car deliveries in Q2 compared to Q1, the widening loss weighed heavily on investor sentiment.
Paramount Global Rises on Merger Talks: Paramount Global's stock climbed 5.7% after reports of potential merger discussions involving its Paramount+ streaming service. Companies like Warner Bros. Discovery, whose shares rose 1.4%, are reportedly interested in merging their streaming services with Paramount+.
Pure Storage Falls on Downgrade: Pure Storage shares dropped 4.2% after UBS downgraded the stock from neutral to sell, citing an unfavourable risk-to-reward ratio. This downgrade reflects concerns over the company's future growth potential and market position.
Eli Lilly and Novo Nordisk Decline on Pricing Concerns: Shares of Eli Lilly and Novo Nordisk fell 1% and 1.7%, respectively, with President Joe Biden and Senator Bernie Sanders criticising the high prices of their weight loss and diabetes drugs, calling them “unconscionably high”. Eli Lilly is up by 0.39% after market hours.
Incyte Drops on Downgrade: Incyte shares decreased by 3% following a downgrade from BMO Capital Markets from market perform to underperform. The price target was lowered to $48 from $52, driven by concerns over the company's decision to buy back up to $2 billion of its common stock.
Lennar Falls Amid Housing Market Concerns: Homebuilder Lennar saw its shares fall 1.6% after downgrades from Citi and Raymond James, which cited broader housing market weaknesses as reasons for the reduced outlook.
CrowdStrike Declines on Valuation Concerns: CrowdStrike Holdings dropped 1.8% following a downgrade from Piper Sandler from overweight to neutral. The brokerage cited high valuations and a lack of near-term catalysts as reasons for the downgrade.
Chewy Continues Volatile Trading: Chewy's shares fell another 2.2%, adding to a week-to-date loss of 10%. The volatility was partly driven by meme stock trader "Roaring Kitty" disclosing a 6.6% stake in the company, alongside stock sales from BC Partners, Chewy's largest shareholder.
PayPal Advances on Upgrade: PayPal's stock rose 2% after Susquehanna upgraded the financial technology company from neutral to positive. The firm noted PayPal's focus on profitable growth as a key driver for the upgrade, bolstering investor confidence.
As the markets navigate the first week of July, the historic highs of the S&P 500 and Nasdaq Composite underscore a wave of optimism driven by strong tech performances and encouraging economic signals. Tesla’s robust delivery numbers and Powell’s positive remarks on inflation progress have lifted investor sentiment, even as challenges like geopolitical tensions and fluctuating oil prices loom. Despite the mixed performance in sectors like healthcare and tech, and the ongoing volatility in European and Asian markets, the overarching mood remains optimistic. Investors are closely watching economic indicators and central bank policies, anticipating further clarity on their path ahead.


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