The U.S. stock market closed mixed on Wednesday, with the Nasdaq 100 index posting a new all-time high. The S&P 500 ended flat, while the Dow Jones fell -0.25%. The Nasdaq’s strong performance was driven by a surge in tech stocks, particularly in the semiconductor sector. Shares of Nvidia and AMD rose more than 4% and 3% respectively, while Super Micro Computer and Symbotic led gains in the S&P 500, each jumping more than 8% after receiving a “buy” rating from analysts.
Geopolitical factors also boosted market sentiment. President Donald Trump’s statement that “the Middle East war is over” and the announcement of a planned meeting between the U.S. and Iran next week sparked investor optimism and revived interest in risk assets.
However, market gains were capped by hawkish comments from Federal Reserve Chair Jerome Powell and disappointing economic data. Powell stated that the Fed sees no immediate reason to cut interest rates, as much of the current data is still historical and inflation is expected to rise due to tariff policies. This view aligns with Kansas City Fed President Jeffrey Schmid, who supports a “wait-and-see” approach.
On the economic front, new home sales in the U.S. dropped 13.7% month-on-month in May to 623,000 units — far below expectations of 693,000 and marking the lowest level in seven months. Meanwhile, weekly mortgage applications rose by +1.1%, but the increase in 30-year mortgage rates to 6.88% raised concerns for the housing market.
In the bond market, the 10-year U.S. Treasury yield fell to 4.289%, reaching its lowest point in 1.5 months. The decline was triggered by weak housing data and expectations of the Fed easing bank capital requirements, allowing banks to absorb more government debt. Still, demand for the 5-year Treasury auction remained weak, as reflected in the low bid-to-cover ratio.
Globally, stock markets were also mixed. The Euro Stoxx 50 index declined 0.85%, while China’s Shanghai Composite gained 1.04%, reaching its highest level in over six months, followed by Japan’s Nikkei which rose 0.39%. The gains in Asia reflect a recovery in risk sentiment amid easing global geopolitical tensions.
Several stocks saw sharp moves, including:
- Nvidia, AMD, Microchip, and Applied Materials rallied on positive sentiment in the chip sector.
- Alphabet rose more than 2% after launching Gemini CLI, an AI assistant for coding.
- Coinbase surged after Bernstein significantly raised its price target.
On the downside, stocks under pressure included:
- Paychex, which dropped 9% following an earnings report that met expectations but disappointed investors.
- Tesla, which declined more than 3% due to a sharp drop in European vehicle delivery data.
- FedEx, which weakened after issuing a Q1 earnings forecast below consensus and withholding full-year guidance due to global demand uncertainty.
Looking Ahead:
Investors now turn their attention to key economic data releases later this week, including:
- Thursday: final estimate of Q1 GDP (expected to remain at -0.2%),
- Friday: PCE inflation data (the Fed’s preferred inflation measure), personal income and spending, and the University of Michigan consumer sentiment report.
Meanwhile, the likelihood of a rate cut at the July FOMC meeting remains low, with market odds at just 25%.