Tech Rally Fuels S&P, Nasdaq to Record Highs

Asian stocks set to rise as S&P 500 hits 7-session high; Fed cuts expected in 2024.

By Bill Bullington

7/10, 18:58 EDT
Apple Inc.
NVIDIA Corporation

Key Takeaway

  • Asian stocks are set to rise, following a tech-driven rally in the US, with S&P 500 and Nasdaq 100 hitting new highs.
  • Treasuries remained stable post a $39 billion 10-year bond sale; swaps indicate two Fed rate cuts in 2024, likely starting September.
  • Powell's testimony and upcoming core CPI report will be crucial for Fed's rate cut decisions, influencing market stability and investor sentiment.

Tech Rally Propels Global Markets

Asian equities are set for a positive start following a surge in the world's largest tech stocks that lifted US and global shares to new highs. The bullish momentum from Wall Street, with the S&P 500 and Nasdaq 100 hitting new peaks, reflects a broader rally driven by companies like Nvidia Corp. and Apple Inc. The S&P 500's seven-session winning streak, its longest since November, has propelled global equities to record levels.

Fed Rate Cut Expectations and Market Stability

Despite the rally, Treasuries remained stable after a successful $39 billion sale of 10-year bonds, with yields slipping slightly to 4.28%. Swaps are pricing in two Fed cuts in 2024, with higher chances of the first cut in September. The market's calmness amidst key data releases, including Fed Chair Powell's testimony and upcoming inflation reports, indicates a level of stability despite potential rate cut expectations.

Powell's Testimony and Inflation Outlook

Jerome Powell's testimony to Congress highlighted the Fed's evolving assessment of risks, potentially paving the way for a rate cut in September. Powell emphasized the need for further work on the labor market and balance-sheet runoff, signaling a cautious approach to policy adjustments. The upcoming core CPI report, expected to show a modest 0.2% increase in June, could influence the Fed's confidence in the inflation trajectory and the timing of rate cuts.

Economic Reports and Market Developments in Asia

In Asia, a flurry of economic reports, including consumer confidence in Thailand, machine orders in Japan, and monetary policy decisions in Malaysia and South Korea, will shape market sentiment. China's money supply and new lending figures, along with regulatory changes to curb improper arbitrage, will also be closely monitored. Oil prices edged higher, while gold remained stable after recent gains, reflecting a cautious yet optimistic market sentiment.

Street Views

  • Krishna Guha, Evercore (Cautiously Optimistic on US monetary policy):

    "The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September."

  • Mark Hackett, Nationwide (Neutral on market conditions):

    "Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season."

  • Anna Wong, Bloomberg Economics (Bullish on inflation trajectory):

    "June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory. That should set the stage for the Fed to start cutting rates in September."

Management Quotes

  • Jerome Powell, Federal Reserve Chairman:

    "The Fed doesn’t need inflation below 2% before cutting rates... The labor market has cooled pretty significantly."