Market Overview
The U.S. stock market rebounded strongly. Major indices finished higher after early volatility. Investor sentiment improved significantly by day’s end. This marked a positive close despite initial headwinds.
Major Indices
- Dow Jones Industrial Average (DJIA): The DJIA closed at 42,035.48. It saw a modest 0.08% increase. The index demonstrated resilience after a turbulent morning.
- S&P 500: The S&P 500 surpassed key resistance levels. It finished at 5,935.94, rising 0.41%. This move indicated growing market confidence.
- Nasdaq Composite: The Nasdaq Composite also climbed. It advanced 0.67% to 19,204.61. This pushed it above the 19,200 mark.
- Russell 2000: Small-cap stocks, represented by the Russell 2000, gained. The index rose 0.09% to 2,068.19.
- All major indices concluded the session positively.
Key Market Trends &News
Early trading saw significant market jitters. President Donald Trump’s proposed 50% steel tariffs caused concern. This policy threatened to escalate global trade tensions. European markets reacted negatively to the news.
However, a crucial announcement spurred a market recovery. Around 10:54 AM ET, the White House confirmed a potential phone call between Trump and Chinese President Xi Jinping this week. This official statement fueled hopes for diplomatic progress. It suggested a “Trump put” might be in play. This positive news quickly shifted market sentiment.
Concerns about the Federal Reserve’s interest rate policy also weighed initially. The Fed showed no immediate intention to cut rates. Market probabilities suggested a 55% chance of a rate cut to 4.00-4.25% by September. A 39.6% probability existed for two cuts by December. Fed Governor Christopher Waller hinted at temporary inflation, advocating for earlier cuts. However, Fed Chair Jerome Powell’s recent remarks did not address specific rate decisions.
Interest Rates & Bond Market
- Bond yields rose across the board. The 10-year Treasury yield increased by 3 basis points (bps). It settled at 4.44%. The 30-year Treasury yield also gained 4 bps. It closed at 4.97%. Rising bond yields typically indicate falling bond prices. This dynamic reflected broader “Sell America” sentiment.
- A notable shift occurred in the yield curve. The 30-year Treasury yield surpassed the 20-year Treasury yield temporarily. Historically, the 20-year bond often yielded higher due to lower demand. This normalization indicates a healthier term premium. A steeper yield curve generally signals market expectations for economic growth. However, uncontrolled long-term bond yields could limit equity market gains. They impact discount rates and could slow economic activity. Today’s yield rise happened despite a weaker-than-expected ISM Manufacturing PMI. This suggested the market might be factoring in other influences.
Commodities Market
- The U.S. Dollar Index continued its descent. It fell 0.67% to 98.50. This marked its fifth consecutive month of decline. A weaker dollar can support commodity prices.
- Gold prices surged significantly. They climbed 2.75% to $3,406 per ounce. This reflected heightened risk aversion during the initial market sell-off. Gold often acts as a safe-haven asset.
- Oil prices also experienced an uptick. OPEC’s lower-than-expected production output drove this increase. Higher oil prices supported energy sector stocks.
Major Tech Stocks Performance
Technology and semiconductor stocks performed strongly. Broadcom surged 2.60%. This was ahead of its earnings report this Thursday. Morgan Stanley raised its price target for both Broadcom and Nvidia. They issued “Buy” ratings.
- Nvidia saw renewed buying interest. Bank of America raised its price target to $180 from $160. Wedbush also maintained a “Buy” rating. Nvidia’s stock successfully rebounded after earlier fluctuations.
- Meta Platforms contributed to the index gains. The Wall Street Journal reported Meta’s plans for AI-powered advertising. This fully automated system is expected to launch next year.
- Apple also helped lift the market. Anticipation built for its upcoming WWDC developer conference. Apple is also challenging a European order regarding user data.
- Intel saw a boost from a new partnership. It announced a collaboration with SoftBank on AI-focused memory chips.
- Microsoft remained a leader in the $3 trillion club. Nvidia held its position as the second-largest company. Apple regained its spot in the $3 trillion market cap club. Broadcom rose to the 8th largest, valued at $1.1 trillion. Tesla and TSMC followed in market capitalization rankings.
Market Sentiment & Flows
Initial “Sell America” sentiment was prevalent. This was driven by trade war fears and Fed hawkishness. The Fear & Greed Index remained at 63. It showed no significant shift in overall sentiment.
Institutional Investor Activity:
- Recent trends showed extreme caution from institutional investors. Approximately three weeks prior, Bank of America data revealed hedge funds’ and institutional investors’ lowest net buying flows since 2008. Individual investors, in contrast, recorded record-high net purchases, essentially driving the market.
- However, a significant shift was observed last week. Goldman Sachs reported that hedge funds engaged in their fastest global equity buying spree since November 2024. This involved buying across all regions, especially North America and Europe. Technology stocks were the primary focus, seeing the largest weekly net purchases in five years. AI-centric companies, chip manufacturers, and equipment providers were key targets. This indicates a potential turning point where institutions are now re-engaging with the market.
- Tesla (TSLA) Performance: Tesla saw a 1% decline to $342. This was largely due to the tariff news. The stock briefly touched $333, a psychological support level. It then rebounded to $343. Despite a temporary break of its 15-day moving average ($336), it recovered. Trading volume remained low, suggesting higher interest in semiconductors. Reports surfaced about Tesla potentially abandoning its $25,000 model. News about 1 million Powerwall units produced and a 213% sales increase in Norway (2,600 units in May) provided some positive news. High short interest (63.84%) was noted, but buying interest at lower prices supported the stock.
Sector Performance:
- Trade tariff concerns specifically impacted the automotive sector. Tesla (down 1%), Lucid (down 1.35%), Rivian (down 2.96%), Ford, and GM all experienced declines. This was directly linked to the higher steel and aluminum import costs.
- Conversely, semiconductor stocks thrived. They are less affected by metal tariffs. Micron Technology, for example, saw significant gains. The Philadelphia Semiconductor Index gained 1.51%. The SMH ETF rose 1.48%.
- Manufacturing Sector: Cleveland-Cliffs surged 22%, and Steel Dynamics climbed 13%. Aluminum companies like Alcoa also benefited.
- Retail and Consumer Discretionary: Nike, Lululemon, Starbucks, and Amazon all saw gains.
- Healthcare and Biotech: UnitedHealth (UNH) rebounded, along with Tempus AI (up 15%) and Novo. Neuralink’s progress in brain-computer interfaces garnered attention.
- Quantum Computing: QBTS (up 4.84%), Cubit (up 4%), and IonQ (up 0.62%) all posted gains.
- Financial Services: JPMorgan gained, along with fintech companies like Affirm and SoFi.
- Travel and Defense: United Airlines (UAL) and Boeing saw increases. Drone manufacturers also performed well amid ongoing global conflicts.
Upcoming Key Economic Indicators & Events
Investors are closely monitoring several reports. The JOLTS Job Openings data will be released tomorrow. This is a key indicator of labor market health. The highly anticipated Non-Farm Payrolls and Unemployment Rate will be released this Friday. These reports will provide further clarity on the U.S. economy.
Conclusion & Market Outlook
The U.S. market closed higher after a volatile session. Initial concerns about trade tariffs and Fed policy subsided. Hope for U.S.-China diplomatic talks spurred a strong rebound. Institutional investors seem to be re-engaging with the market, especially in tech. While major indices ended positively, market breadth was mixed. Approximately 3,011 stocks advanced, while 3,272 declined. This indicated a nuanced market environment. Future economic data will be crucial for short-term market direction.
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Consult a qualified financial advisor before making investment decisions.