Key Points:
The Nasdaq Composite (Symbol: NAS100) and the S&P 500 (Symbol: SP500) surged to fresh all-time highs, continuing their strong performance with market enthusiasm for artificial intelligence prospects and favorable economic data. With a “just ok” jobs report, traders returned from the Fourth of July holiday break with renewed vigor, pushing the indices higher.
Pictures: The Nasdaq Composite and S&P500 rallying to record high, as observed on the VT Markets app.
The Labor Department reported that US employers added 206,000 new jobs in June, a decrease from the May revised figure of 218,000. Although the June figure surpassed expectations of 189,000, this creates the perception that the labor market is cooling. A slowing labor market could provide the Fed with the rationale needed to consider cutting its benchmark interest rate.
The spotlight now shifts to Federal Reserve Chair Jerome Powell, who is set to testify before lawmakers. Powell’s words are expected to shed light on the stance of the Fed on interest rates and the broader economy. The central bank is looking for more definitive signs that inflation is under control before making any decisions on rate cuts.
Understand more about this principle: Interest rate tug-of-war for central banks
Additionally, the June Consumer Price Index (CPI) report, scheduled for release on Thursday, is anticipated to show a decline in inflation from 3.3% in May to 3.1%. This data will be crucial in determining the next steps by the Fed. A lower inflation reading would reinforce the case for potential rate cuts, bolstering investor sentiment further.
The interplay between economic data and Fed policy will continue to drive market dynamics. The continued momentum in tech stocks, particularly those tied to AI developments, can be a good opportunity for trend trading. Risk management remains crucial, especially with the upcoming CPI report and Fed Chair Powell’s speech.
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