Wall Street reached new heights on Tuesday, with the S&P 500 surpassing its previous all-time high set two weeks ago. The index rose 0.6%, while the Dow Jones Industrial Average gained 0.4% and the Nasdaq composite climbed 0.8% from its own record achieved the day before. The surge was largely driven by Tesla, whose shares soared 9.1% after the electric-vehicle manufacturer reported better-than-expected sales for the spring season.
However, the market was not without its setbacks. Nvidia, a prominent player in artificial intelligence technology, experienced a 1.4% decline, weighing heavily on the S&P 500. Similarly, Eli Lily saw a 1.1% drop following President Joe Biden’s criticism of the company’s pricing practices for weight loss and diabetes treatments in an opinion piece for USA Today.
Treasury yields eased after Federal Reserve Chair Jerome Powell expressed optimism about progress on inflation, fueling hopes for potential interest rate cuts later this year. Powell acknowledged improvements in inflation data, which had previously shown higher-than-anticipated readings earlier in the year. The expectation on Wall Street is that a slowdown in inflation will prompt the Fed to lower its main interest rate, which has remained at its highest level in over two decades, potentially stimulating economic growth. Treasury yields have been declining since April, reflecting growing confidence in this outcome.
However, a report released on Tuesday may have dampened hopes for rate cuts. The report indicated that U.S. employers advertised more job openings at the end of May than economists had anticipated, surpassing the previous month’s figures. While this is positive news for workers, concerns arise on Wall Street that a robust job market could exert upward pressure on inflation, potentially delaying rate cuts. Following Powell’s comments, Treasury yields initially declined but later pared their losses after the release of the job openings report. The 10-year Treasury yield stood at 4.44%, compared to 4.46% at the previous close.
Political developments have also influenced Treasury yields recently. The presidential debate between Joe Biden and former President Donald Trump last week prompted traders to anticipate a possible Republican sweep in November, resulting in higher Treasury yields due to concerns over increased government debt. Although the 10-year yield remains above its level from late Thursday, it has retraced from its recent peak.
In commodities markets, the price of benchmark U.S. crude oil dipped 0.5% after briefly reaching its highest level since April. Brent crude, the international standard, fell 0.3%. Rising crude prices have been driven by expectations of strong summer demand and the potential impact of hurricanes on oil production in the Gulf of Mexico. Hurricane Beryl’s trajectory suggests it may approach Jamaica and the Cayman Islands.
In European markets, indexes declined following a report indicating that inflation in the region remains above the European Central Bank’s target level. Germany’s DAX lost 0.7%, while France’s CAC 40 fell 0.3%. However, French stocks had rallied the previous day after election results suggested that a far-right political party may not secure a decisive majority in the country’s legislative elections. This outcome raised the possibility of gridlock in the French government, preventing a scenario where a far-right majority could implement policies leading to a significant increase in government debt.
In Asia, Japan’s Nikkei 225 rose 1.1% as the value of the Japanese yen neared another 38-year low. A weaker yen can benefit Japanese exporters.