To The Moon

Recent Market Activity and Federal Reserve Insights

Federal Reserve Chair Jerome Powell has emphasized that while inflation appears to be receding, he isn't yet confident that price gains are sustainably slowing to the Fed's 2% target. This cautious stance has resulted in no strong signals on the timing of rate cuts, though markets continue to speculate on potential reductions later in the year.

Despite this caution, US stocks have continued their upward trajectory. Both the $S&P 500(.SPX)$ and Nasdaq 100 achieved gains exceeding 1% yesterday, setting new record highs. The S&P 500 closed above the 5,600 mark for the first time, and the Nasdaq Composite also hit a record. This robust performance was driven by major tech stocks like $NVIDIA Corp(NVDA)$ and $Apple(AAPL)$ . Apple, in particular, has announced plans to ship 10% more new devices, leveraging artificial intelligence to boost demand.

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Asian markets followed suit, advancing after a rally in global tech stocks. $Taiwan Semiconductor Manufacturing(TSM)$ , a key supplier for Nvidia and Apple, reported its fastest quarterly sales growth since 2022, trading at record levels.

$TSM

Stock Market Dynamics

The S&P 500 and Nasdaq Composite continue to hit record closes, reflecting the strong performance of large-cap stocks. The S&P 500's 1% gain brought it to a new milestone, marking its 37th record close of the year, while the Nasdaq achieved its 27th. However, this repetitive record-setting has somewhat diminished excitement, akin to Oprah Winfrey's famous car giveaways.

Meanwhile, the Dow Jones Industrial Average also saw a positive day, snapping a two-day losing streak with a 1.1% increase, although it remains shy of its own record highs. In contrast, small-cap stocks have significantly underperformed, gaining only 3% year-to-date compared to large caps’ 20% gain.

• Inflation Trends and Rate Cut Expectations

The upcoming Consumer Price Index (CPI) report is highly anticipated. Forecasts suggest that consumer prices will show the smallest consecutive increases in underlying inflation since last summer, potentially supporting the case for a Fed rate cut in September.

CPI

Overall inflation is expected to register at 3.1% year-over-year, a slowdown from May's 3.3%. Monthly headline inflation is projected to be 0.1%, up slightly from May's steady prices. Core CPI, which excludes volatile food and energy prices, is anticipated to hold steady at 0.2% monthly and 3.5% annually.

• Federal Reserve Chair Powell's Testimony

During his recent testimony before Congress, Powell maintained a cautious stance, avoiding any clear indications on the timing of rate cuts. His two-day testimony provided no major revelations, aligning with his goal to refrain from sending premature signals about future actions.

• Earnings Reports

Conagra Brands, Delta Air Lines, and PepsiCo are set to report their earnings, which will provide insights into corporate performance and consumer demand.

Conclusion

The current market environment is characterized by strong performances in major indices, driven by key tech stocks, amid cautious optimism regarding future Federal Reserve actions. While inflation appears to be trending downwards, upcoming economic data will be pivotal in determining the Fed’s next steps. Investors should remain attentive to these developments, particularly the CPI report and corporate earnings, as they could significantly impact market dynamics…

This report is for informational purposes only and does not constitute financial advice. Investing in financial markets involves risk, and you should consult with a qualified financial advisor before making any investment decisions. The information contained herein is based on sources believed to be reliable but is not guaranteed for accuracy or completeness. Past performance is not indicative of future results.

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