S&P 500 Breaks Historic 5,600 Mark on Tech Giants’ Surge: Market Roundup

(Bloomberg) — Rising shares of the world’s biggest technology companies sent stocks to record highs as Jerome Powell’s remarks to Congress did little to dissuade traders from betting on rate cuts from the Federal Reserve this year.

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For the first time in its history, the S&P 500 topped 5,600. A renewed push by megacaps led the index to its longest rally since November, with Nvidia Corp. up 2.5% and Apple Inc. rising after announcing plans to ship 10% more new iPhones after a turbulent 2023. Treasuries were fairly steady after a sharp $39 billion sale of 10-year notes. Swaps are pricing in two Fed rate cuts in 2024 — with the first one more likely to come in September.

As Wall Street braces for the consumer price index, Powell said the Fed doesn’t need inflation to fall below 2% before cutting rates, but added that policymakers still have work to do. He noted that the labor market has “cooled considerably.” Powell cited “good leads” on balance sheet reduction and said commercial real estate does not threaten financial stability.

“The key takeaway from his testimony is that the Fed’s assessment of the balance of risks is evolving in a way that – if supported and sustained by incoming data – will result in a rate cut in September,” Evercore’s Krishna Guha said.

The S&P 500 index climbed for a seventh straight day, while the Nasdaq 100 gained 1%. Gold and silver mining stocks gained on Fed easing bets. Banks underperformed. Alphabet Inc., Google’s parent company, abandoned its efforts to acquire HubSpot Inc., according to people familiar with the matter.

The yield on 10-year US bonds fell two basis points to 4.28%. Bank of England chief economist Huw Pill said the timing of a rate cut was still an “open question,” prompting traders to trim bets on an August cut. Oil rose as a US holiday boosted demand for gasoline and jet fuel.

“Markets remain remarkably calm despite the flood of data this week, including testimony from Fed Chair Powell, CPI/PPI reports and the start of earnings season,” said Nationwide’s Mark Hackett.

The so-called core CPI, which excludes food and energy costs and is considered a better measure of underlying inflation, is expected to rise 0.2% in June for a second straight month. That would be the smallest consecutive increase since August, a pace more acceptable to Fed officials.

“The June CPI report looks set to be another ‘very good’ report that should bolster the FOMC’s confidence in the path of inflation,” said Anna Wong of Bloomberg Economics. “This should pave the way for a Fed rate cut in September.”

A survey by 22V Research shows that 55% of investors expect the market reaction to Thursday’s CPI to be “at risk”, 16% “at risk” and 29% “mixed/negligible”.

“There is some optimism about inflation in general,” said Dennis DeBusschere of 22V, adding that the survey also showed investors believe “CPI is on a path that is favorable to the Fed.”

Meanwhile, some trading desks…

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