The US stock market saw broad gains on June 26th, driven by significant economic data and shifting policy expectations. Notably, all major indices advanced, with the Dow Jones Industrial Average nearing a 1% rise. Optimism around potential interest rate cuts and positive corporate earnings fueled this upward momentum. Investors are closely watching upcoming economic indicators and Federal Reserve communications for future direction.
Major Index Performance Overview
The Dow Jones Industrial Average climbed 0.94%, reaching 43,386.84. This marked a strong performance for the Dow.
Meanwhile, the S&P 500 rose 0.80% to 6,141.02, nearing its all-time high.
The Nasdaq Composite increased 0.97%, closing at 2,167.91. Its RSI hit 70, indicating an overheated market.
The Russell 2000 led gains, surging 1.68% to 2,172.11.
The VIX index, a measure of market volatility, dropped 2.03% to 16.44. This reflects increased market stability and reduced fear among investors.
Catalysts for Market Ascent
Several factors contributed to Wednesday’s market rally. Firstly, interest rate cut expectations intensified. Reports suggested President Donald Trump might appoint a new Fed chair by September. This “shadow chair” concept could accelerate rate reductions. Markets now price in a 75.6% chance of a rate cut by September. Furthermore, odds for multiple rate cuts by December rose. A three-cut scenario now holds a 48.7% probability.
Secondly, the revised GDP data offered support. The US GDP was adjusted to −0.5%, down from an expected −0.2%. While signaling a slowdown, it doesn’t indicate a severe recession. This economic cooling provides the Federal Reserve with more reason to consider earlier rate cuts. Additionally, unemployment claims rose to 1.974 million, exceeding forecasts. This further underscored signs of economic deceleration.
Thirdly, Micron Technology’s strong earnings boosted the semiconductor sector. Micron reported impressive results, surpassing analyst expectations. The company’s earnings per share were 1.91,up36.6% year-over-year. Robust sales of High Bandwidth Memory (HBM) chips were a key driver. This positive news uplifted other chipmakers, including Nvidia.
Finally, bond market activity played a role. A 7-year Treasury auction saw strong demand, with a 2.5 times bid-to-cover ratio. This influx of bond buying lowered Treasury yields. The 10-year yield fell 4bp to 4.24%. The 2-year yield dropped 6bp to 3.71%. Lower bond yields make equities more attractive, boosting stock valuations. The US Dollar Index also declined 0.37% to 96.91. A weaker dollar typically supports US exports and corporate earnings, further aiding the stock market.
Sectoral Performance & Key Company News
The technology sector generally performed well on June 26th. Nvidia continued its ascent, gaining 0.46%. This came after projections from analysts at Loop Capital suggested a potential market capitalization of 6 trillion. Nvidia maintains its position as the world’s most valuable company, currently at 3.78 trillion. However, its RSI above 70 indicates an overbought condition. Microsoft holds the second spot with a 3.69 trillion market cap, followed by Apple at 3 trillion.
Tesla, however, dipped 0.53% to 325.0, marking its third consecutive daily decline. News emerged of the dismissal of Omar Afshar, Vice President of Manufacturing and Operations. This decision reportedly stemmed from declining vehicle sales. Despite this, positive developments for Tesla included renewed efforts to resume FSD (Full Self-Driving) testing in Sweden. Furthermore, FSD testing is expanding across Europe, including France, Italy, Germany, and the UK. Concerns about environmental pollution from XAI’s power generation in Memphis also surfaced, though their impact on Tesla remains unclear. Investors eagerly await Tesla’s Q2 vehicle delivery announcement on July 2nd. Short interest remains high at 35.76%, indicating continued bearish bets.
Micron Technology, despite strong earnings, saw its stock fall 0.98%. This was likely due to profit-taking after recent gains. The company’s robust guidance and solid HBM sales were positive highlights.
Palantir Technologies shares declined despite news of providing AI solutions for nuclear power plants. Amazon rose 2.42%, even with the departure of a key AWS generative AI vice president. Google unveiled new Gemini coding tools, enhancing its AI offerings. Meta Platforms announced plans for a new 10 billion data center in Louisiana, supporting its AI infrastructure. Rocket Lab surged 11.72% after news of its involvement in European satellite launches.
Financial stocks also benefited from easing regulatory concerns for banks. This led to gains across the banking sector. Coinbase and other fintech companies saw a rebound. Consumer discretionary and restaurant chains performed well, with Nike reporting strong post-market earnings. Nike’s EPS of 1.14 and revenue of 11.1 billion exceeded expectations. Other gainers included Crocs, Macy’s, Starbucks, Domino’s Pizza, McDonald’s, and Lululemon. Healthcare stocks showed mixed results, with Novo Nordisk and Eli Lilly up, while Merck dipped. Airline and drone stocks also advanced.
Outlook & Potential Headwinds
Market analysts, including those from Goldman Sachs, foresee increased volatility in the second half of the year, particularly from July. A major concern is the potential for stagflation, a scenario where inflation rises amid economic stagnation. This could be exacerbated by ongoing tariffs. The upcoming Personal Consumption Expenditures (PCE) price index release is critical. Core PCE is projected to rise 0.1%, with headline PCE also up 0.1%. Second-half inflation forecasts have increased to 2.5%−2.6%. This underscores the importance of a balanced portfolio to navigate potential market shifts.
Federal Reserve officials offered cautious remarks. San Francisco Fed President Mary Daly noted tariffs hadn’t significantly boosted inflation yet. However, she emphasized that a fall rate cut isn’t guaranteed. Thomas Barkin of the Richmond Fed echoed similar sentiments. He suggested tariffs could raise prices, but more certainty is needed before adjusting rates. Susan Collins of the Boston Fed indicated a single rate cut this year is possible, but likely not in July, pointing towards September. Overall, the market remains hopeful for a September rate cut, contingent on economic data.
On June 26th, 4,482 stocks advanced, while 1,828 declined, indicating broad market strength. The CNN Fear & Greed Index rose to 62, confirming market exuberance. In the cryptocurrency market, Bitcoin (107,488) and Ethereum (2,441) remained largely flat. XRP dipped 3% to 2.12. Funds appeared to flow from crypto into the equity market.