(Bloomberg) — Wall Street traders sent stocks to all-time highs as bond yields fell, with traders looking at prospects for Federal Reserve rate cuts after Jerome Powell cited signals the US is back on a disinflationary path.
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For the first time in its history, the S&P 500 closed above 5,500 to extend a blistering 2024 rally that has left analysts scrambling to update their targets. It was the gauge’s 32nd record this year. Tesla Inc. surged 10% to lead gains in megacaps, though Nvidia Corp. failed to gain traction. The Nasdaq 100 hit the 20,000 mark, also notching a record high.
More than $16 trillion has been added to the S&P 500’s value from a closing low on October 2022. Equities keep defying doomsayers amid solid corporate earnings, the artificial-intelligence mania and expectations that interest rates will drop. And the lack of any meaningful pullback has given bulls conviction that the rally is sustainable.
The S&P 500 will surge to new peaks by the end of the year as economic strength outweighs market risks, according to Lori Calvasina at RBC Capital Markets. She raised her year-end target to 5,700 from 5,300 — among the highest on Wall Street — despite the fact that the market has “gotten a bit ahead of itself.”
“Our suspicion is that 2024’s economy will end up being strong enough to justify a strong move in the S&P 500 for the year as a whole,” Calvasina said.
The record-setting surge in US equities, driven chiefly by American technology behemoths, is once again igniting comparisons to prior boom-and bust cycles on Wall Street. But parallels to the dot-com era and stock-market frenzies of the past are so far exaggerated, if history is any guide.
While the S&P 500 has posted an about 85% advance since 2019, even despite some drawdowns over the period, major bull runs of the 20th century dwarf that return. The US stock benchmark soared 220% in the last five years of the Internet bubble at the turn of the century, according to Bloomberg Intelligence data, and 238% in the same-period stretch of the Roaring Twenties.
Deutsche Bank AG strategists expect US earnings to rise by an above-average 13% for the second quarter, driven by megacap growth and tech stocks. The outlook is for a sixth straight quarter of above average beats.
However, the team led by Binky Chadha expects market reaction to be subdued as stocks have rallied in the run-up to the season.
“Overweight equity positioning argues for a muted rally,” they noted.
On the economic front, data Tuesday showed job openings unexpectedly rose, interrupting a trend that underscored a slowdown in labor seen as key for Fed easing.
Powell said there’s been a “substantial” move toward better balance between the supply of and demand for workers. He described the job market as strong, but said it is cooling off appropriately so.
To Krishna Guha at Evercore, Powell’s comments were notably upbeat on inflation progress — while also incrementally careful on the balance of risks and employment.
“There was no explicit signal on cuts, but these were assessments that would plausibly support a cut in September,” Guha said.
Wall Street is gearing up for a slew of economic data that will hit the tape Wednesday — when the market closes early due to Thursday’s US holiday.
And that’s all ahead of the all-important US payrolls reading due Friday. Economists expect the report to show employers added about 195,000 payrolls in June and the unemployment rate held at 4%.
US PREVIEW: Minutes to Show Fed’s Rate-Cut Forecast a Close Call
Corporate Highlights:
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Novo Nordisk A/S and Eli Lilly & Co. fell as President Joe Biden demanded price cuts on their weight loss and diabetes drugs. Separately, Lilly won US approval for an Alzheimer’s treatment.
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Lennar Corp. and D.R. Horton Inc. dropped after being downgraded by Citigroup Inc. on concerns about a “sluggish” housing market.
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Paramount Global is in exclusive talks to sell its Black Entertainment Television network to buyers that include BET Chief Executive Officer Scott Mills and Chinh Chu, who runs the New York-based private equity firm CC Capital.
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Apple Inc. will get an observer role on OpenAI’s board as part of a landmark agreement announced last month, further tightening ties between the once-unlikely partners.
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Robinhood Markets Inc. is considering offering cryptocurrency futures in the US and Europe in the coming months, according to people familiar with the commission-free investing and trading platform’s plan.
Key events this week:
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China Caixin services PMI, Wednesday
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Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
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US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
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Fed’s John Williams speaks, Wednesday
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UK general election, Thursday
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US Independence Day holiday, Thursday
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Eurozone retail sales, Friday
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US jobs report, Friday
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Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.6% as of 4 p.m. New York time
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The Nasdaq 100 rose 1%
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The Dow Jones Industrial Average rose 0.4%
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The MSCI World Index rose 0.5%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro was little changed at $1.0746
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The British pound rose 0.3% to $1.2686
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The Japanese yen was unchanged at 161.46 per dollar
Cryptocurrencies
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Bitcoin fell 2.2% to $61,874.51
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Ether fell 1.5% to $3,410.95
Bonds
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The yield on 10-year Treasuries declined three basis points to 4.43%
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Germany’s 10-year yield was little changed at 2.60%
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Britain’s 10-year yield declined three basis points to 4.25%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alexandra Semenova, Farah Elbahrawy, Jessica Menton, Elena Popina, Julien Ponthus, Robert Brand and Aya Wagatsuma.
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