Rate Hike Fears Diminish as Market Rallies
U.S. stock markets are primed for an optimistic start this Friday, driven by indicators of deflating price pressures and sluggish economic expansion. This new landscape generates anticipation that the Federal Reserve's era of monetary constriction may conclude soon. Both the S&P 500 and Nasdaq surged to new 14-month peaks on Thursday, following a raft of economic data suggesting slowing inflation. This momentum overshadowed worries about the Fed's forecasted interest rate hikes made on Wednesday.
Federal Reserve’s Balancing Act Boosts Market Confidence
The U.S. central bank has indicated that borrowing costs may see a hike of up to half a percentage point by year's end. However, traders have factored in just one more 25-basis-point rate hike, projected for July, according to CMEGroup's Fedwatch tool. "The market is appreciating the Federal Reserve’s ‘thread the needle’ strategy, taming inflation without suppressing economic growth," commented Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott. "This optimism is evidenced by a rally that is increasingly extending beyond AI-centric companies."
Tech Giants Amplify Market Strength
The main U.S. indexes appear set for an impressive weekly performance, with significant stocks such as Nvidia and Microsoft fueling the Nasdaq's tech-heavy rise. This positions Nasdaq for its eighth straight week of gains. After hitting an all-time high, Microsoft saw a slight premarket increase of 0.6%, pushing the company's record market value to $2.59 trillion. Nvidia also ascended 1.5% following Morgan Stanley’s revised price target of $500 and the bank’s endorsement of the chipmaker as its top U.S. semiconductor choice.
Market Volatility and Promising Economic Data
While Friday's trading might experience some volatility due to triple witching – the simultaneous expiration of stock options, stock index futures, and index options contracts – the economic data brings promising news. The University of Michigan's preliminary consumer sentiment reading, expected to increase to 60 in June from 59.2 in May, will be announced at 10:00 a.m. ET. As of 8:42 a.m. ET, Dow e-minis were up 0.13%, S&P 500 e-minis increased by 0.25%, and Nasdaq 100 e-minis rose by 0.36%.
Market Movers – Adobe, iRobot, and Carnival
Adobe Inc. witnessed a surge of 4.9% as the Photoshop maker's earnings predictions exceeded analyst forecasts, reflecting the successful efforts of integrating generative AI to stimulate demand. Roomba vacuum maker, iRobot Corp, saw its stocks leap 20% following the clearance of Amazon's $1.7 billion acquisition of the company by the UK competition regulator. Meanwhile, cruise operator Carnival Corp experienced a gain of 1.7% after Citigroup elevated its price target, expressing growing confidence in the cruise sector.
