[New York Stock Market] Powell's Disinflation Remarks and Tesla Surge Lift Market... S&P Breaks 5500 for the First Time

S&P 500 and Nasdaq Hit Record Highs Again
Powell Says "Progress on Inflation"... On September Rate Cut Possibility, "No Date Set"
'Trump Tantrum' US Treasury Yields Fall
Focus on FOMC Minutes and June Employment Report

The three major indices of the U.S. New York stock market all rose on the 2nd (local time). The S&P 500 index surpassed the 5500 mark for the first time ever. Remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), indicating entry into a 'disinflation (slowing inflation rate)' path, along with a sharp rise in U.S. electric vehicle maker Tesla, drove the stock price increase.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,331.85, up 162.33 points (0.41%) from the previous trading day. The large-cap-focused S&P 500 index ended trading at 5,509.01, up 33.92 points (0.62%), surpassing the 5500 mark for the first time. The tech-heavy Nasdaq index closed at 18,028.76, up 149.46 points (0.84%), setting a new all-time high once again.

By individual stocks, Tesla, which surged 6.05% the previous day, soared another 10.2% on this day. Tesla announced that its vehicle deliveries in the second quarter of this year reached 443,956 units. Although this figure is 4.8% lower than a year ago, it exceeded experts' forecasts (439,000 units), leading to the stock price increase. Paramount Global rose 5.72% on news that billionaire Barry Diller is considering an acquisition. Nvidia fell 1.31%. Pharmaceutical company Eli Lilly dropped 0.84% after President Joe Biden and Senator Bernie Sanders urged European pharmaceutical companies to lower prices.

Investors reacted to Powell's remarks suggesting progress on inflation. Powell attended a panel discussion at the European Central Bank (ECB) annual forum held in Sintra, Portugal, and stated, "We have made significant progress in bringing inflation down to target," adding, "This suggests we are returning to a disinflation path." However, he also mentioned, "Before embarking on easing policies, we want greater confidence that inflation is sustainably moving toward the 2% target," reiterating his cautious stance on interest rate cuts. Regarding the widely watched possibility of a rate cut in September, he avoided commenting, saying, "I will not set a date."

Krishna Guha, Vice Chairman of Wall Street investment advisory firm Evercore ISI, analyzed Powell's remarks, saying, "There was no clear signal for a rate cut, but it was an assessment that plausibly supports a cut in September."

Government bond yields fell. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 4 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.43%, while the 2-year Treasury yield, sensitive to monetary policy, fell 3 basis points to 4.73%. The day before, bond yields had surged amid rising prospects of former President Donald Trump's election and concerns over a rebound in inflation, showing symptoms of a 'Trump tantrum.'

The market expects one to two rate cuts within the year. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day priced in a 69% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting, slightly up from 65.6% the previous day. The probability of a 0.25 percentage point or more cut in November was similar, at 79.1%, compared to 78% the day before.

The employment data released on this day was stronger than expected. According to the May Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor, job openings in May reached 8.14 million. This exceeded market expectations (7.96 million) and increased by 221,000 from the previous month (7.919 million).

However, a more accurate picture of the U.S. labor market will be revealed in the June employment report to be released by the U.S. Department of Labor on the 5th. Experts expect nonfarm payrolls to increase by 189,000 last month, a significant slowdown compared to 272,000 in the previous month. The unemployment rate is expected to remain steady at 4%.

Employment data will also be released the following day, including June ADP nonfarm payrolls and last week's unemployment claims.

The Federal Open Market Committee (FOMC) minutes are scheduled to be released on the 3rd. With the Fed having reduced its forecast for the number of rate cuts this year from three to one, it will be possible to see what opinions officials exchanged during the FOMC meeting.

International oil prices fell. West Texas Intermediate (WTI) crude oil closed at $82.81 per barrel, down $0.57 (0.7%) from the previous trading day, while Brent crude, the global oil price benchmark, ended at $86.24 per barrel, down $0.36 (0.4%).

Meanwhile, on the 3rd, the New York stock market will close early at 1 p.m. ahead of the U.S. Independence Day on the 4th. The market will be closed on the 4th.