FX.co ★ U.S. Stocks Rally Ahead Of Close Watched Inflation Data

In a stark turnaround from the previous session’s tepid performance, stocks surged on Wednesday, with the S&P 500 closing above the 5,600 mark for the first time in history.

Major indices continued their upward momentum towards the end of the session, closing near their daily highs. The Nasdaq soared by 218.16 points, or 1.2%, to settle at 18,647.45. The Dow Jones Industrial Average climbed 429.39 points, or 1.1%, to 39,721.36. Meanwhile, the S&P 500 advanced by 56.93 points, or 1.0%, finishing the day at 5,633.91.

The rally on Wall Street was largely driven by significant gains in technology stocks, as evidenced by the tech-heavy Nasdaq reaching a new all-time high.

The boost in tech stocks followed an impressive report from Taiwan Semiconductor (TSM), which revealed that its second-quarter sales greatly exceeded expectations.

Shares of Taiwan Semiconductor, a key chip supplier for AI leaders such as Nvidia (NVDA) and Apple (AAPL), jumped by 3.5%.

Additionally, investor optimism surrounding future interest rate trends bolstered market sentiment ahead of the anticipated consumer price inflation data release on Thursday.

Economists project that the annual consumer price growth rate will decelerate to 3.1% in June from 3.3% in May. The core consumer price growth rate is expected to remain steady at 3.4%.

During his congressional testimony, Federal Reserve Chair Jerome Powell indicated that continued positive data would enhance the Fed’s confidence in inflation moving sustainably towards its 2% target, potentially leading to an interest rate cut.

Powell also cautioned that maintaining elevated interest rates for an extended period might threaten economic growth.

"Given the progress achieved in lowering inflation and cooling the labor market over the past two years, high inflation is not the only risk we face," he stated. "Delaying or reducing policy restraint too little could unduly weaken economic activity and employment."

Sector News

Gold stocks experienced a substantial upswing, pushing the NYSE Arca Gold Bugs Index up by 2.9% to its highest closing level in over two years, driven by a rise in gold prices.

Semiconductor stocks also exhibited significant strength, with the Philadelphia Semiconductor Index surging by 2.4% and reaching a new record-closing high.

The housing sector saw notable gains as well, with the Philadelphia Housing Sector Index climbing by 1.9% during the session.

Other sectors, including brokerage, biotechnology, and pharmaceuticals, also showed marked strength, rising in unison with most of the other major sectors.

Other Markets

Overseas, stock markets in the Asia-Pacific region displayed mixed results on Wednesday. Japan’s Nikkei 225 Index rose by 0.6%, whereas China’s Shanghai Composite Index fell by 0.7%.

In contrast, major European markets were universally up for the day. The U.K.’s FTSE 100 Index increased by 0.7%, while both Germany’s DAX Index and France’s CAC 40 Index jumped by 0.9%.

In the bond market, treasuries largely stagnated for most of the day, eventually closing slightly higher. Consequently, the benchmark ten-year note yield, which moves inversely to its price, decreased by 2.0 basis points to 4.280%.

Looking Ahead

Thursday’s trading is expected to be influenced by reactions to the Labor Department’s report on consumer price inflation and its implications for the interest rate outlook.