U.S. stock indices showed restrained movement midweek, adopting a wait-and-see approach ahead of key macroeconomic releases and amid signs of easing geopolitical tensions. The S&P 500 hovered 0.9% below its all-time high without making a strong attempt to break new ground, while the Nasdaq Composite held steady thanks to support from tech giants. Meanwhile, the Nasdaq 100 reached a fresh record high, powered by a semiconductor rally.
Tech Sector Drives the Rally
The market continues to find strength in its tech leaders. Nvidia surged over 4%, bolstering both the Nasdaq 100 and the Dow Jones Industrial Average. Riding its momentum were AMD, Microchip, Applied Materials, and Marvell Technology. Investors remain focused on companies tied to AI and data center infrastructure—precisely the area that boosted Micron Technology, whose shares jumped 6.3% after a strong earnings report.
Support also came from a bullish outlook on Microsoft, as analysts expect its aggressive AI initiatives to meaningfully drive future revenue. Microsoft’s annualized AI-related revenue has already reached $13 billion.
Geopolitics and Fed Rhetoric Temper Optimism
Despite a tech-fueled lift, broad market indices pulled back from recent highs, weighed down by mixed signals. On the geopolitical front, a potential ceasefire between Israel and Iran, along with Donald Trump's remarks that the Middle East war was "over," brought temporary relief.
However, Federal Reserve Chair Jerome Powell’s hawkish tone put a damper on investor enthusiasm. Powell cautioned against rushing into rate cuts, citing persistent inflation risks. Kansas City Fed President Schmid echoed this sentiment, stressing the need to monitor the effects of tariffs and policy shifts before adjusting rates. This contributed to pressure on Treasury yields, which initially declined on weak housing data but remained volatile.
Macro Data Paints a Cautious Picture
New home sales in May plunged 13.7%, the steepest drop in seven months. Adding to the housing market woes, the 30-year fixed mortgage rate rose to 6.88%, impacting buyer activity. These indicators raised red flags about consumer strength and economic momentum.
Investors now turn their attention to upcoming reports. First-quarter GDP, inflation (PCE), and personal spending data are all on deck. The PCE price index—a key inflation gauge for the Fed—will be closely watched, as will the University of Michigan’s consumer sentiment revision.
Market Movers: Winners and Losers
While the broader market paused, several stocks saw dramatic moves. Top gainers included:
Super Micro Computer (+8%) after GF Securities initiated coverage with a "Buy" rating;
Symbotic (+8%) following a bullish analyst outlook;
Coinbase (+3%) after Bernstein raised its price target to $510;
Alphabet (+2%) on the release of Gemini CLI, a new AI programming assistant.
Decliners included:
Paychex (-9%) on weak earnings;
NuScale Power (-10%) after a downgrade;
General Mills (-5%) on disappointing sales;
Tesla (-3%) following a 40% year-over-year drop in European vehicle registrations.
FedEx slipped 3% after providing a soft earnings forecast, while WEC Energy lost over 2% after a downgrade by Goldman Sachs.
Global Snapshot and Bond Market Moves
European indices ended the session mostly lower, while China’s Shanghai Composite surged to a 6-month high. U.S. Treasuries rose in response to weaker housing data and expectations that the Fed might ease capital requirements for banks. Yet, a weak 5-year Treasury auction and persistent Fed hawkishness kept gains in check.
Markets currently price in a 25% chance of a rate cut at the Fed’s July meeting. Meanwhile, yields in Europe and the U.K. are climbing amid inflation concerns and strong demand.
The stock market is treading water in the face of conflicting signals. On one hand, tech strength and easing geopolitical concerns offer upside. On the other, hawkish Fed messaging, weak macro data, and housing market fragility are cause for caution. Investors appear to be awaiting a clear signal—either from policymakers or from the data—before committing to a breakout rally or preparing for a deeper pullback.
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