Despite a turbulent economic landscape, the Nasdaq Composite and S&P 500 have surged to fresh closing records, driven by a remarkable performance from Apple. The tech giant’s shares soared over 7%, leading the market upward as investors eagerly anticipate the Federal Reserve’s policy decision. This rally comes amid mixed signals from the global economy, with European and Asian markets reacting cautiously to inflation data and central bank meetings. As the Federal Reserve begins its two-day policy meeting, market participants are focused on potential shifts in interest rate projections, adding a layer of uncertainty to the otherwise optimistic outlook for major US indexes.

Key Takeaways:

  • Nasdaq and S&P 500 Set New Records: The Nasdaq Composite surged 0.88% to close at 17,343.55, while the S&P 500 gained 0.27%, finishing at 5,375.32. Both indexes achieved new all-time highs during the session, demonstrating strong investor confidence.
  • Dow Jones Slips Amid Profit-Taking: The Dow Jones Industrial Average fell 0.31%, or 120.62 points, to close at 38,747.42. Investors appeared to be taking profits from Nvidia, which dipped 0.7%.
  • European Markets Decline: The Stoxx 600 index dropped 0.9%, with all sectors closing in the red. The FTSE 100 fell 0.98% to 8,147.81, and the CAC 40 declined 1.32%, reflecting investor caution ahead of the US Federal Reserve’s meeting.
  • UK Employment and Wage Data: UK unemployment rose to 4.4% in the three months to April, the highest since September 2021. Annual wage growth excluding bonuses held steady at 6%, presenting a challenge for the Bank of England amid inflation concerns.
  • Asia-Pacific Markets Mixed: Japan’s Nikkei 225 climbed 0.92% to 39,038.16, while South Korea’s Kospi fell 0.79% to 2,701.17. The mixed performance comes ahead of key economic data releases and central bank decisions.
  • Apple Hits All-Time High: Apple shares jumped 7.3% to a record high, driving the Nasdaq’s and S&P 500’s gains. The iPhone maker’s surge was fuelled by investor enthusiasm over new features unveiled, which could lead to a significant wave of iPhone upgrades.
  • Oil Prices Stabilise: US crude oil futures settled at $77.90 per barrel, up 0.21%, while Brent crude futures rose 0.36% to $81.92 per barrel. OPEC’s steady demand forecasts for 2024 and 2025 supported the gains.
  • US Treasury Yields Fall: The yield on the 10-year Treasury fell seven basis points to 4.398%, and the 2-year Treasury yield dropped nearly six basis points to 4.83%. This decline comes as the Federal Reserve begins its two-day policy meeting, with investors closely watching for any shifts in interest rate projections.

FX Today:

  • Gold Price Stays Firm in Anticipation of US CPI Data and FOMC Decision: The XAU/USD is trading at $2,311, up 0.07% and virtually unchanged. Gold price has formed a Head-and-Shoulders chart pattern, suggesting it could head towards the pattern objective between $2,160 and $2,170. Currently subdued at $2,300, the metal awaits a fresh catalyst from the Fed’s monetary policy decision. A drop below $2,300 could see demand areas at $2,277 and $2,222, with further losses expected around the $2,200 figure. Conversely, if buyers push prices above $2,350, consolidation in the $2,350 to $2,380 range is likely.
  • USD/JPY Struggles at 157.00: The USD/JPY pair is trading at 157.13, up 0.07%. The daily chart indicates that buyers are losing momentum, with the pair failing to hold gains above 157.00 after reaching a weekly high of 157.40. The Relative Strength Index (RSI) remains bullish but is trending downward, suggesting fading momentum.
  • Canadian Dollar Shuffles in Place Ahead of Fed ‘Dot Plot’ Update: The USD/CAD pair briefly tested above 1.3780 in early Tuesday trading as the US Dollar built on minor risk-off flows. However, the CAD held steady, limiting movement in the pair. Any downside in USD/CAD will find support above the 1.3600 handle, with 2024 highs resting at 1.3846. The pair is up nearly 4% for the year, maintaining a high-side trading position.
  • Australian Dollar Trades Neutral on Mixed Australian Figures: The AUD/USD pair faced bearish pressure on Tuesday, lingering around the 0.6605 area after a minor rebound on Monday. Despite the shift, the positive outlook persists as the pair remains above the 100 and 200-day SMA at approximately 0.6550, indicating an overall positive trend.
  • EUR/GBP Hobbled by European Election Turmoil but Soft UK Labor Limits Losses: EUR/GBP has fallen out of recent consolidation to test multi-month lows, trading down to 0.8420. Bullish recovery remains limited, with the pair struggling below 0.8460. EUR/GBP has closed flat or down for four consecutive weeks, on pace for a fifth. The 200-day Exponential Moving Average (EMA) is turning bearish from 0.8617, with any bullish recoveries expected to encounter resistance above the 0.8500 handle.
  • GBP/USD Consolidates Ahead of FOMC Decision: The GBP/USD pair is consolidating around 1.2687-1.2750, ahead of the Federal Reserve’s monetary policy decision. Momentum indicators suggest fading buying pressure, with the RSI pointing to increasing seller traction. A hawkish Fed decision could push GBP/USD below 1.2687, targeting the 100-day moving average (DMA) and May 3 cycle high turned support at 1.2643/37, and potentially down to 1.2600. Conversely, lifting past 1.2750 could challenge the 1.2800 figure.

Market Movers:

  • Oracle Jumps on Cloud Deals: Oracle’s shares surged nearly 9%, closing at $77.58, after announcing significant cloud deals with Google and OpenAI. Despite missing fiscal fourth-quarter expectations with adjusted earnings of $1.63 per share on $14.29 billion in revenue, the new partnerships drove investor optimism.
  • Rubrik Advances on Strong Revenue: Shares of Rubrik climbed 3% to $24.87 after the cloud data management company reported first-quarter revenue of $187 million, surpassing analyst expectations of $172 million. The better-than-expected revenue performance boosted market confidence in Rubrik’s growth trajectory.
  • Rentokil Initial Gains on Trian Partners Stake: Rentokil shares jumped nearly 7%, closing at $35.12, after Nelson Peltz’s Trian Partners confirmed it had taken a significant position in the pest-control giant, now being a top-10 shareholder. This strategic move is aimed at enhancing shareholder value through potential leadership engagement.
  • Affirm Holdings Surges on Apple Pay Integration: Affirm Holdings saw its stock rise by 11% to $23.44 following the announcement that its buy-now-pay-later loans will be embedded into Apple Pay later this year. This integration is expected to drive significant user adoption and transaction volumes.
  • General Motors Boosts on Share Repurchase Program: GM’s stock added about 1.4%, closing at $41.28, after announcing a $6 billion share repurchase program. Despite cutting its 2024 EV sales forecast to between 200,000 and 250,000 units from a prior range of 200,000 to 300,000 units, the buyback program signalled strong financial health.
  • Southwest Airlines Falls Amid Activist Investor Interest: Southwest Airlines shares dropped 5.6% to $34.76 after the airline announced it was open to meeting with Elliott Management. The activist firm has a $1.9 billion stake in Southwest and is pushing for leadership changes to enhance operational efficiency.
  • Academy Sports and Outdoors Declines on Disappointing Q1: Academy’s stock fell more than 3% to $48.12 after reporting Q1 adjusted earnings of $1.08 per share, missing analysts’ estimates of $1.21 per share. The earnings miss led to a downgrade from Bank of America to neutral from buy, further pressuring the stock.

As markets grapple with economic uncertainties and the anticipation of central bank decisions, the record highs of the Nasdaq Composite and S&P 500 highlight a notable investor focus on technology and innovation. However, the mixed performances in Europe and Asia underscore the broader caution prevailing in global markets. Currency and commodity fluctuations, alongside significant stock movements influenced by earnings reports and strategic developments, reflect the market’s complex and uncertain landscape. With the Federal Reserve’s policy decisions looming, investors remain vigilant, balancing potential growth opportunities against the backdrop of economic and monetary policy challenges.