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S&P 500 and Nasdaq Rally Amid Megacap Recovery and Favorable Economic Data

A recovery in mega-cap stocks and encouraging economic data pave the way for gains in the S&P 500 and Nasdaq, despite the specter of Federal Reserve interest rate hikes.


Robust Economic Indicators Bolster S&P 500 and Nasdaq

The S&P 500 and the Nasdaq look set to begin Tuesday's trading on a high note, buoyed by a rebound in mega-cap stocks and encouraging capital goods orders data. This positivity defuses some anxiety surrounding the U.S. economy's momentum amid the Federal Reserve's assertive interest rate adjustments. Conversely, the Dow faced pressure following Walgreens Boots Alliance's 8.7% drop due to the pharmacy chain trimming its annual profit forecast amidst dwindling demand for COVID-19 tests and vaccines.

Healthy Data Shores Up Futures

Futures for both S&P 500 and Nasdaq enjoyed a lift from the information indicating a 0.7% upswing in May for non-defense capital goods orders, barring aircraft. This metric, a key barometer for business expenditure plans, surpassed the static predictions anticipated by economists surveyed by Reuters. Further economic health indicators, including new home sales and consumer confidence data, are expected to roll out later in the day.

Speculation Over Fed's Interest Rate Approach

"The sentiment is mounting that the Fed is nearing the end of its rate hike cycle," noted Peter Andersen, the founder of Andersen Capital Management. Market watchers are eager for any clues to dissipate the uncertainty stirred by the Fed's previous meeting. Key focus also falls on the European Central Bank Forum in Sintra, Portugal, where key figures, including Fed Chair Jerome Powell, are slated to speak this week.

Upcoming Fed Meeting and Interest Rate Hike

A bullish trend on Wall Street hit the brakes last week after Powell hinted at more impending rate hikes. As per CME Group's Fed watch tool, traders have factored in a 76.9% probability of the Fed escalating interest rates by 25 basis points to a range of 5.25%-5.50% at its July meeting.

US Stock Indexes Poised for Q2 Gains

Despite the recent slump, the primary U.S. stock indexes are on track for gains in the second quarter. The propulsion comes from a surge in growth stocks, optimistic earnings reports, and expectations of the Fed's looming end to its monetary tightening stance.

Nvidia building
Nvidia building

Megacap Stocks Show Positive Signs

As of 8:40 a.m. ET, Dow e-minis fell by 9 points (0.03%), S&P 500 e-minis climbed 10.5 points (0.24%), and Nasdaq 100 e-minis ascended by 77.5 points (0.52%). Leading market players like Amazon, Tesla, and Nvidia reported approximately a 1% rise each. Meta Platforms saw a 1.5% boost after Citigroup elevated its price target on the stock, making it Wall Street's highest.

Partnerships, Stimulus Plans, and Bankruptcies Impacting Market

Snowflake, the cloud data analytics company, saw a 4.1% rise post-announcement of a partnership with Nvidia to facilitate AI model building for customers using their data. Meanwhile, U.S.-listed shares of Chinese firms Alibaba Group and gained almost 2% after Chinese Premier Li Qiang announced economic stimulus plans and predicted Q2 growth surpassing Q1. However, Alphabet experienced a 0.5% dip after Bernstein downgraded the stock to "market perform." Lordstown Motors tumbled 59.9% as the U.S. electric truck manufacturer sought bankruptcy protection and put itself up for sale following an unresolved investment dispute with Foxconn.