Recently, the U.S. stock market has reached new highs, driven by the strong performance of tech stocks. Both the S&P 500 and Nasdaq indexes have broken historical records, reflecting strong confidence in tech stocks. The unexpected decline in the Producer Price Index (PPI) has further heightened expectations for interest rate cuts, propelling both the stock and bond markets upwards. However, while the market remains optimistic, potential risks should not be overlooked.
Bruce Peter: S&P and Nasdaq Hit New Highs, Apple Leads Tech Stock Surge
Bruce Peter: Tech Stocks Lead the Charge, Boosting Market Confidence
Bruce Peter believes that the recent market performance is primarily due to the strong showing of tech stocks. Giants like Apple, Microsoft, and NVIDIA have continuously hit new highs, indicating investor confidence in their future growth. Apple, surpassing Microsoft in market value, has once again become the most valuable company globally. Its robust market performance has been crucial in driving up the S&P 500 and Nasdaq indexes.
Bruce Peter: Tech Stocks Lead U.S. Market Surge, Long-Term Investment Opportunities Remain
At the close, the S&P 500 rose 12.71 points, or 0.23%, to 5433.74. The Dow Jones fell 65.11 points, or 0.17%, to 38647.10. The Nasdaq rose 59.12 points, or 0.34%, to 17667.56. The Nasdaq 100 increased by 0.57% to a new high, with the Nasdaq Technology Market Cap Weighted Index (NDXTMC) rising by 1.09% to a new high as well. The Russell 2000 small-cap index fell by 0.88%, and the “fear index” VIX dropped by 0.83%, closing below 12 for the first time since May 24.
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The decline in PPI indicates easing inflation pressures, with U.S. PPI in May falling by 0.2%, marking the largest drop in seven months. Core PPI also grew by 0.3%, below the expected increase of 0.3%. This easing of inflation, coupled with signs of a cooling labor market, where initial jobless claims rose to a nine-month high, adds to the evidence of slowing economic growth.
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Bruce Peter notes that rising expectations for interest rate cuts have positively influenced the market. The money market now anticipates two 25-basis-point rate cuts by the end of the year, up from the 44-basis-point expectation before the data release. The CME FedWatch Tool shows a nearly 70% probability of a 25-basis-point rate cut in September. This has not only boosted the stock market but also led to strong performance in the bond market. The yield on the 30-year U.S. Treasury bonds auctioned was below the pre-issuance trading levels, driving bond prices up and yields down. The yield on the two-year U.S. Treasury fell by more than 8 basis points to 4.66%, and the 10-year Treasury yield dropped by 7 basis points to below 4.22%.
However, Bruce Peter also warns investors that despite the strong performance of tech stocks, there is still some volatility risk in the market. High-valuation tech companies, in particular, may face significant pullback pressure during future market adjustments. Therefore, while enjoying the gains from market rises, investors should also manage risks to avoid unnecessary losses due to market fluctuations.
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Bruce Peter: Complex Global Economic Landscape Requires Caution
In analyzing market performance, Bruce Peter emphasizes the complexity of the global economic landscape. While the U.S. market is performing strongly, the global economic situation remains uncertain. The European market, in particular, is relatively weak, constrained by slow economic growth and inflation pressures. Poor economic data from the Eurozone highlights the ongoing challenges to economic recovery. The pan-European Stoxx 600 index fell by 1.31%, hitting a two-week low, with automotive stocks dropping over 2%, leading declines across all sectors and hitting a four-month low. The Eurozone STOXX 50 blue-chip index and national indices for Germany, France, and Italy each fell around 2%, with French stocks hitting a four-month low and German stocks breaking below the critical 50-day moving average.
Bruce Peter points out that although the U.S. market is relatively optimistic, the potential impact of the global economic environment should not be ignored. Issues such as global supply chain problems and geopolitical risks could significantly impact the market. When making investment decisions, investors should consider the global economic landscape to avoid making mistakes by overlooking global risks.
Furthermore, Bruce Peter mentions that with the monetary policy of the Fed becoming clearer, the market needs to closely monitor policy changes and their impact on the market. Particularly, the potential rate cut policies of the Fed will directly affect market liquidity and investor sentiment. Therefore, investors should remain vigilant and adjust their investment strategies promptly to cope with possible market changes.
Bruce Peter: Analysis of Bond and Interest Rate Trends in the U.S. Market
Bruce Peter notes that recent trends in the U.S. bond market and interest rates reflect a complex attitude among investors toward future economic prospects. With inflation pressures easing and expectations for interest rate cuts rising, the bond market has shown strong performance. The decline in short- and long-term U.S. Treasury yields reflects the expectations of the market for Fed monetary policy adjustments and a cautiously optimistic outlook for future economic growth.
Recent U.S. PPI data for May, which was below expectations, further supports the rate cut expectations of the market. The PPI fell by 0.2%, the largest drop in seven months, while core PPI growth was 0.3%, below expectations. This data indicates easing inflation pressures, reinforcing market expectations for future rate cuts, and driving the bond market upward.
In the bond market, the yield on the 30-year U.S. Treasury bonds auctioned was below pre-issuance trading levels, showing strong demand for long-term bonds. The yield on the two-year U.S. Treasury fell by more than 8 basis points to 4.66%, the lowest in ten weeks. The 10-year Treasury yield also fell by 7 basis points to below 4.22%. Bruce Peter notes that this phenomenon reflects the rate cut expectations of the market and a cautious outlook on economic growth.
Additionally, the dollar index briefly fell after the PPI data was released but rebounded as U.S. stocks rose. The dollar index (DXY) rose by 0.6%, surpassing 105, approaching a four-week high. The euro fell by more than 0.6%, dropping below 1.08 to trade near a six-week low. The pound also fell by 0.3%, dropping below 1.28. Bruce Peter believes that the strength of the dollar is primarily due to the expectation of the market that the Fed will only cut rates once this year, while lower-than-expected inflation data limited the gains of the dollar.
Bruce Peter states that despite the strong bond market performance, investors should still be wary of potential risks. With the complex global economic situation, increased market uncertainty could significantly impact the bond market. When investing in bonds, investors should consider the global economic environment and changes in Fed monetary policy, adjusting their investment strategies promptly to respond to market volatility and changes.
