(Bloomberg) — Stocks in Asia are set to follow a record-breaking rally on Wall Street as traders weighed prospects for Federal Reserve rate cuts after Jerome Powell cited signals the US is back on a disinflationary path.
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Futures for Tokyo, Hong Kong and Sydney pointed higher. The S&P 500 closed above 5,500 for the first time in its history — the gauge’s 32nd record this year — to extend a blistering rally that has left analysts scrambling to update their targets. Tesla Inc. surged 10% to lead gains in megacaps, though Nvidia Corp. failed to gain traction. The Nasdaq 100 closed above the 20,000 mark for the first time.
In other markets, oil backed off a two-month high while the Bloomberg Dollar Spot Index slipped for a third time in four days. Treasury yields fell for the first day in three and Bitcoin declined as miners faced lower fees.
Equities keep defying doomsayers amid solid corporate earnings, the artificial-intelligence mania and expectations that interest rates will drop, adding more than $16 trillion to the S&P 500’s value from a closing low on October 2022. A lack of any meaningful pullback has given bulls conviction that the rally is sustainable.
The S&P 500 will surge to new peaks by the end of the year as economic strength outweighs market risks, according to Lori Calvasina at RBC Capital Markets. She raised her year-end target to 5,700 from 5,300 — among the highest on Wall Street — despite the fact that the market has “gotten a bit ahead of itself.”
“Our suspicion is that 2024’s economy will end up being strong enough to justify a strong move in the S&P 500 for the year as a whole,” Calvasina said.
On the economic front, data Tuesday showed job openings unexpectedly rose, interrupting a trend that underscored a slowdown in labor seen as key for Fed easing.
Powell said there’s been a “substantial” move toward better balance between the supply of and demand for workers. He described the job market as strong, but said it is cooling off appropriately so.
To Krishna Guha at Evercore, Powell’s comments were notably upbeat on inflation progress — while also incrementally careful on the balance of risks and employment.
“There was no explicit signal on cuts, but these were assessments that would plausibly support a cut in September,” Guha said.
Wall Street is gearing up for a slew of economic data that will hit the tape Wednesday — when the market closes early due to Thursday’s US holiday.
And that’s all ahead of the all-important US payrolls reading due Friday. Economists expect the report to show employers added about 190,000 payrolls in June and the unemployment rate held at 4%.
Elsewhere in commodities, copper rose for a third day, extending its rebound from a two-month low, as investors weighed possible stimulus measures in China and interest-rate cuts in the US.
US PREVIEW: Minutes to Show Fed’s Rate-Cut Forecast a Close Call
Key events this week:
China Caixin services PMI, Wednesday
Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
Fed’s John Williams speaks, Wednesday
UK general election, Thursday
US Independence Day holiday, Thursday
Eurozone retail sales, Friday
US jobs report, Friday
Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 7:08 a.m. Tokyo time
Hang Seng futures rose 0.5%
S&P/ASX 200 futures rose 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0748
The Japanese yen was little changed at 161.42 per dollar
The offshore yuan was little changed at 7.3069 per dollar
The Australian dollar was little changed at $0.6669
Cryptocurrencies
Bitcoin was little changed at $61,937.21
Ether rose 0.1% to $3,419.45
Commodities
This story was produced with the assistance of Bloomberg Automation.
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