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Bullish US Stocks Rally Amid Fed Rate Hike Speculation and Strong Company Performances

The US stock market continues to rise as optimistic investors speculate on the Federal Reserve's impending interest rate decision and key corporations report strong performances.

Federal Reserve
Federal Reserve

The Bull Market Bet Amid Fed Speculation

Monday saw a significant rally in US stocks, placing the S&P 500 tantalizingly close to its highest closing level since April 2022. Boosted by significant gains in market giants, including Amazon and Tesla, the S&P 500 has recovered over 20% from its lows in October 2022. This upswing, some investors suggest, indicates Wall Street is experiencing a bull market. Investors are growing more confident as the October lows recede further into the past, an optimistic sentiment contributing to the market's positive trajectory.

Encouraging Market Indicators

The S&P 500 was up by 0.48%, marking a potential highest close since April 21, 2022. The Nasdaq enjoyed a jump of 1.01%, while the Dow Jones Industrial Average saw a modest increase of 0.19%. Traders are keenly awaiting the Federal Reserve's interest rate decision, with many predicting a hold on rates for the time being, and the release of the US Labor Department's inflation data.

The Central Bank's Next Move

There's a 76% chance of the central bank maintaining the current interest rates at the 5%-5.25% range, according to CME's Fedwatch tool. However, market players are also pricing a 71% chance of a rate hike in July. Dylan Kremer, a co-chief investment officer of Certuity, predicts a data-dependent approach from the Federal Reserve, suggesting steady rates shortly but not ruling out a potential rate hike.

Broader Rally Driven by Earnings and Economic Resilience

The rally has recently broadened to incorporate economically sensitive sectors like energy, industrials, and small-cap stocks. This diversification is supported by a resilient US economy, seemingly undeterred by higher interest rates and strong quarterly earnings reports. Moreover, mega-cap stocks are rallying amidst speculation that the Federal Reserve's monetary tightening cycle may end.

Companies on the Rise

Several companies stood out in Monday's rally. Oracle reached an all-time high following a price target increase from J.P. Morgan. Biogen also saw a rise of 1.3% as its Alzheimer's drug received positive feedback from a US FDA panel of advisers. Furthermore, Broadcom jumped 5.8% following reports of conditional EU antitrust approval for its proposed acquisition of VMware, lifting the Philadelphia semiconductor index by 2.9%.

The Market Landscape

Six of the 11 S&P 500 sector indexes experienced increases, with information technology and consumer discretionary leading the pack. Nasdaq Inc experienced a slump after announcing its expensive acquisition of software firm Adenza. However, advancing issues outnumbered declining ones within the S&P 500 by a 1.3-to-one ratio.