U.S. stocks demonstrated upward momentum on Tuesday, driven by mega tech stocks, as economic data indicated resilience in the face of higher interest rates. As the second quarter and first half of the year approached their conclusion, investors remained optimistic.
Key Points:
- The Dow Jones Industrial Average rose 135 points or 0.4%, reaching 33,850.
- The S&P 500 climbed 20 points or 0.5%, reaching 4,349.
- The Nasdaq Composite gained 78 points or 0.6%, reaching 13,414.
- On Monday, the Nasdaq Composite led the market lower, declining by 1.2%, while the S&P 500 fell by 0.5%, and the Dow experienced a fractional loss.
Market Drivers:
The stock market maintained its gains on Tuesday following a series of positive economic indicators, including durable-goods orders, home sales, and consumer confidence.
Despite some concerns about an economic slowdown and profit-taking by fund managers before the end of the month and the first half of the year, the S&P 500 index has experienced gains in certain sectors throughout/2023, with only five out of the past six sessions showing declines.
Despite Monday’s downturn, the S&P 500 and Nasdaq are poised to end June with gains of over 3%, while the Dow is expected to achieve a monthly advance of nearly 2.6%. This Friday marks the conclusion of the second quarter and first half of/2023. The Nasdaq has seen an increase of nearly 10% in the quarter, on track for its best first half in 40 years. The S&P 500 and Dow are also set to finish the quarter with gains of approximately 6% and 2%, respectively.
Richard Hunter, Head of Markets at Interactive Investor, noted that the strength of mega-cap technology stocks this year will likely result in portfolio rebalancing during the last trading week of the quarter and half-year. Hunter also mentioned that the Nasdaq experienced some profit-taking after a strong recovery following a challenging 2022.
Sentiment has been weighed down by concerns that the Federal Reserve will maintain higher borrowing costs for a longer duration. Additionally, financial markets on Monday largely disregarded a brief mutiny by Russia’s Wagner Group mercenary force, which raised questions about Vladimir Putin’s hold on power.
Market expectations suggest that the Federal Reserve will raise its policy interest rate by 25 basis points to a range of 5.25% to 5.50% towards the end of July and postpone any rate reduction until spring 2024.
China’s Premier Li Qiang’s comments on Tuesday also boosted risk appetite. Li stated that the second-largest economy in the world remains on track to achieve its annual growth target of around 5%. He added that Beijing would implement policies to expand domestic demand and open markets.
