S&P 500 and Nasdaq Hit Record Highs Amid Cooling Inflation and Optimism in AI

Despite April typically being a challenging month for stocks, the S&P 500 and Nasdaq Composite surged to new record highs, driven by a lighter-than-expected US consumer inflation report and growing enthusiasm for artificial intelligence (AI). The S&P 500 closed above 5,300 for the first time, while the tech-heavy Nasdaq Composite also reached unprecedented levels. This market rally comes as inflation data suggests a possible interest rate cut by the Federal Reserve, boosting investor sentiment. With major indices posting multiple record closes this year, the strong performance highlights the ongoing optimism in tech sectors and the broader economic outlook.

Key Takeaways:

• S&P 500, Nasdaq, and Dow Jones reach new Heights: The S&P 500 surged 1.17% to close at 5,308.15, marking the first time the index has ended above the 5,300 level. This represents the 23rd record close for the S&P 500 in 2024. The Nasdaq Composite jumped 1.40% to finish at 16,742.39, driven by gains in tech stocks and investor optimism around AI. This is the eighth record close for the Nasdaq this year. The Dow Jones Industrial Average climbed 349.89 points, or 0.88%, to end at 39,908.00, marking the 18th record close for the Dow in 2024.
• Inflation Data Sparks Optimism: The consumer price index (CPI) rose 0.3% in April, below the 0.4% forecast, with an annual increase of 3.4%, aligning with expectations. Core CPI also met forecasts with a 0.3% monthly and 3.6% annual rise.
• Treasury Yields Dip: The yield on the benchmark 10-year US Treasury note fell by 10 basis points to 4.344%, and the 2-year Treasury yield dropped by 9 basis points to 4.726% following the inflation report.
  European Markets Close Higher: The pan-European Stoxx 600 index rose 0.6%, led by a 1.7% increase in utilities stocks, while oil and gas stocks fell 0.9%. The FTSE 100 Index increased by 17.67 points, or 0.21%, to 8,445.80. Shares of Dutch bank ABN Amro dropped 6% despite reporting a 29% rise in Q1 net profits. Germany’s Commerzbank saw its shares jump 5% after a 29% increase in Q1 net profit. Conversely, Burberry shares fell 6%, while other luxury stocks were also down, with Kering losing 0.7% and LVMH dropping 0.4%.
• Asia-Pacific Markets Mixed: Asia-Pacific markets showed mixed performance on Wednesday. The producer price index for April rose 0.5%, surpassing the expected 0.3%. Mainland China's CSI 300 index fell 0.85% to 3,626.06, while Australia's S&P/ASX 200 index increased by 0.35% to 7,753.70. Japan’s Nikkei 225 gained 0.08% to 38,385.73, and the broader Topix ended flat at 2,730.88. Indonesian exports in April rose 1.72% year-over-year to $19.62 billion, marking the first year-over-year increase in exports since May 2023, although this was a 12.97% decline compared to March. 
• Bitcoin Rallies on Inflation Data: Bitcoin prices surged more than 5% to $64,910.57 following the April consumer price index report indicating easing inflation. This marks Bitcoin's best day since March 25. At one point, Bitcoin traded above its 50-day moving average, which it hadn't surpassed since April 13. Bitcoin has been trading within the $60,000 to $70,000 range since March, experiencing occasional fluctuations.
• Oil Prices Climb on Inventory Decline: US crude oil prices rose on Wednesday after a larger-than-expected decline in domestic stockpiles. Commercial crude oil inventories, excluding the strategic petroleum reserve, fell by 2.5 million barrels last week, significantly more than the expected 543,000 barrel draw. U.S. crude oil futures for June increased by 0.78% to settle at $78.63 a barrel, reflecting a 9.7% gain year-to-date. Brent crude futures for July rose 0.45% to $82.75 a barrel, marking a 7.4% year-to-date increase. 

FX Today:

• EUR/USD Rallies After Soft Inflation Data: The EUR/USD pair climbed nearly 0.5% on Wednesday, breaking through trendline resistance at 1.0865. The pair reached an intraday high of 1.0900 before settling around 1.0880, indicating a potential move towards 1.0980 if the bullish momentum continues. Support remains at 1.0865, with further resistance at 1.1020.
• USD/JPY Drops Sharply: The USD/JPY pair fell from the week's high near 156.80, tumbling to the 155.00 level following the US CPI report. Despite this decline, the pair remains above the 200-day EMA at 148.44, with immediate support at the 50-day EMA at 153.28. A breach below this level could signal a further drop towards the recent swing low at 152.00.
• USD/CAD Struggles Near 1.3600: The USD/CAD pair tested the 1.3600 handle but failed to maintain momentum, retreating to the lower end of the near-term demand zone. As it trades below the 200-hour EMA at 1.3678, the pair faces resistance at 1.3600 to 1.3620, with a potential move lower towards the 200-day EMA at 1.3546 if bearish pressure persists.
• EUR/JPY Maintains Bullish Momentum: Despite some profit-taking, the EUR/JPY pair held strong, trading around 168.63 after brushing near the 170.00 mark. The overall technical outlook remains positive, with key support levels at the 50-day and 200-day SMAs, maintaining the bullish trend as traders watch for further upward movement.

Gold Soars Amid Easing Inflation and Rate Cut Hopes: Gold prices surged, nearing a three-week high as inflation data boosted expectations for a Federal Reserve rate cut. The XAU/USD pair faced initial resistance at $2,400, with further supply zones at the April 19 high of $2,417 and the all-time high at $2,431. Support levels to watch include $2,359 and the May 9 low of $2,306, with the 50-day SMA at $2,249 acting as a key floor.

Market Movers:

• Nvidia Jumps on Inflation Data: Nvidia shares surged 3.6% following the softer-than-expected inflation report, reflecting optimism around the tech sector and AI-driven growth.
• Apple and Microsoft Gain: Both Apple and Microsoft saw their shares rise over 1% as the inflation data bolstered tech stocks. Apple's closing price was $183.12, while Microsoft's reached $318.54.
• Homebuilders Rally: Homebuilder stocks surged after the 10-year T-note yield fell to a 5-week low, supporting housing demand. DR Horton (DHI) closed up more than 6%, while Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL) each gained over 5%.
• Chip Stocks Soar: The chip sector saw significant gains with Advanced Micro Devices (AMD), KLA Corp (KLAC), and Broadcom (AVGO) closing up more than 4%. Nvidia, Marvell Technology (MRVL), Lam Research (LRCX), and Applied Materials (AMAT) also rose over 3%. Additionally, Qualcomm (QCOM), Micron Technology (MU), and Texas Instruments (TXN) closed up more than 2%.
• Trade Desk Rises on Netflix Deal: Trade Desk (TTD) shares jumped more than 4% after announcing an advertising partnership with Netflix, aimed at facilitating automated ad purchases on the streaming platform.
  Monday.com Soars: Monday.com (MNDY) saw its shares surge more than 20% after reporting Q1 revenue of $216.9 million, beating the consensus estimate of $210.5 million.
• NU Holdings Gains: NU Holdings Ltd (NU) shares climbed over 4% following a strong Q1 net income report of $378.8 million, surpassing the consensus of $336.1 million.
• Shift4 Payments Jumps: Shift4 Payments (FOUR) rose more than 10% after an SEC filing revealed insider buying, with CEO Isaacman purchasing $5.76 million worth of stocks.
• Arista Networks Upgraded: Arista Networks (ANET) shares increased over 3% after William O'Neil & Co. reinstated coverage of the stock with a buy recommendation.
• Teradyne Gains on New Position: Teradyne (TER) shares rose more than 3% after a 13F filing with the SEC showed Aspex Management HK reporting a new 1.1% position in the company.
• Solventum Downgraded: Solventum (SOLV) shares fell over 4% after Spin-Off Research downgraded the stock to hold from buy.
  FMC Corp Declines: FMC Corp (FMC) shares dropped more than 3% after announcing it won't reinstate share buybacks until late 2025 or 2026 as it seeks to reduce leverage.
• Disney Falls on Spending Cuts: Walt Disney (DIS) shares declined more than 2%, leading losses in the Dow Jones Industrial Average, after CEO Iger announced significant cuts in marketing expenses and content spending.
  Boeing Faces Legal Issues: Boeing (BA) shares fell over 2% amid potential criminal prosecution related to violations of a deferred-prosecution agreement from two fatal crashes five years ago.
• Dlocal Plummets: Dlocal (DLO) shares plunged more than 26% after reporting Q1 revenue from continuing operations of $184.4 million, below the consensus estimate of $191.9 million.
• Royal Mail Owner Surges: Shares of International Distributions Services jumped 17% after announcing a potential takeover offer from Czech billionaire Daniel Kretinsky.