Earnings and Optimism About AI Demand and Rate Cuts Drives Wall Street Indexes to New Highs

Alexander Garcia
20 May, 2024
Miami

Stocks on Wall Street advanced, and market indexes are set to close higher at the start of a new week after rallying in the previous four weeks in a row. 

Investors continued to bid up artificial intelligence-linked stocks ahead of Nvidia's earnings later in the week after several analysts upgraded the stocks and raised the price target, suggesting as much as 30% upside. 

In the week ahead, investors in the U.S. are looking forward to the release of the minutes of the latest policy meeting on Wednesday and updates on durable goods orders and the consumer sentiment index.

Moreover, investors are looking ahead to the release of earnings from Nvidia, Palo Alto Networks, Lowe’s, Analog Devices, Synopsis, Zoom Video Communications, Ralph Lauren, AutoZone, Target, and TJX.

 

U.S. Indexes and Treasury Yields

The S&P 500 index and the Nasdaq Composite inched further into record territory as optimism ruled market sentiment for the fifth week in a row. 

Market sentiment has been driven by rate-cut expectations, corporate quarterly results meeting lowered expectations, and positive sentiment surrounding artificial intelligence technology development and application. 

The S&P 500 index increased 0.3% to 5,319.87, and the Nasdaq Composite advanced 0.7% to 16,797.55. 

The yield on 2-year Treasury notes edged higher to 4.84%, 10-year Treasury notes increased to 4.44%, and 30-year Treasury bonds edged higher to 4.58%.

Natural gas prices advanced for the fourth session in a row and reached this year's high on the expectation of rising demand from U.S. electric utilities. 

WTI crude oil increased $0.12 to $80.81 a barrel, and natural gas prices increased 2 cents to $2.70 a thermal unit.

Gold increased by $6.11 to $2,420.49 an ounce, and silver rose 9 cents to $31.59. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.54.

 

U.S. Stock Movers

Nvidia soared 2.2% to $947.55 after the maker of ships for artificial intelligence activities was upgraded by several analysts ahead of the company's earnings release on Wednesday. 

Johnson Controls International PLC jumped 2.5% to $70.78 after Bloomberg News reported that activist investment strategy-focused Elliott Investment Management has acquired a stake in the company worth more than $1 billion. 

Palo Alto Networks declined 0.2% to $316.85 ahead of the company's quarterly results after the market closed later on Monday. 

 

Resource Stocks Lead Gainers as European Markets Rebound 

In Monday's trading, indexes in Europe advanced after falling in the previous week as investors debated the timing and amount of future rate cuts. 

Benchmark indexes in Paris, London, and Frankfurt inched higher after resource stocks advanced in London, copper prices soared to a new record high, and crude oil prices turned volatile.

Crude oil prices edged slightly higher after Iran's state television confirmed the death of the president, Ebrahim Raisi, after the helicopter carrying the president, foreign minister, and a regional governor crashed while crossing mountainous climates, foggy weather, and icy conditions. 

In other international news, the People's Bank of China held its one-year and 5-year loan prime rates steady, removed the floor on mortgage rates, and lowered down payment requirements for first-time home buyers. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 18,767.06; the CAC-40 index rose by 0.4% to 8,195.97; and the FTSE 100 index inched higher by 0.1% to 8,424.20. 

The yield on 10-year German bonds edged up to 2.51%; French bonds inched higher to 3.00%; the UK gilts edged higher to 4.13%; and Italian bonds inched higher to 3.81%.

The euro edged higher to $1.086; the British pound inched higher to $1.270; and the U.S. dollar gained to 90.88 Swiss cents.

Brent crude decreased $0.38 to $83.55 a barrel, and the Dutch TTF natural gas rose by €1.09 to €31.85 per MWh.

 

Europe Stock Movers

Keywords Studios PLC soared 62% to 2,382.90 pence after the Irish video game company said that it is in talks with European private equity company EQT Group for a possible cash offer of 2550 pence per share. 

Ryanair Holdings plc declined 1.3% to €19.05 after the discount airline reported a 34% increase in its annual profits but offered cautious views for the current year. 

British Land Company declined 0.8% to 400.0 pence after the real estate developer agreed to sell its stake in Meadowhall Shopping Center in Sheffield, UK, for £360 million to Norges Bank Investment Management. 

Resource stocks advanced after China announced supportive measures to revive property market transactions. 

Anglo American, Glencore, and Antofagasta advanced between 1% and 2% after copper futures rose to a record high of $5.15 per pound before stabilizing at $5.10. 

 

Nikkei 225 In Tokyo Extends Rally to Fifth Week Ahead of Key Economic Releases 

Benchmark indexes in Japan advanced tracking gains in Friday's trading on Wall Street. 

Stocks edged higher in Tokyo in Monday's trading as investors reviewed the rise in energy and metals prices. 

Brent crude oil prices jumped 6 cents to $84.0.2 a barrel after Iran's state-controlled television channel said that President Ebrahim Raisi's helicopter crashed while traveling to East Azerbaijan province and crossing mountainous terrain, foggy weather, and icy conditions. 

Iran's foreign minister and governor of the province, along with bodyguards, are feared to have died in the helicopter crash. 

Closer to home, investors are looking forward to a busy week of economic releases, including international trade, inflation, and business activity updates. 

 

Japan Stock Movers 

Benchmark indexes in Tokyo extended a 4-week rally powered by technology stocks and exporters. 

The yen edged 14-sense higher 155.75 against the U.S. dollar on the worries of persistently wide interest rates between the U.S. and Japanese bonds. 

The Nikkei 225 Stock Average added 1.1% to 39,211.83, and the Topix index gained 0.9% to 2,771.51. 

Automakers were among the leading gainers in Monday's trading, and Tokyo Electron, Advantest, Socionext, and Screen Holdings advanced between 0.5% and 1.2%. 

Banks were also among the most actively traded stocks. 

Mitsubishi UFJ Financial Group added 0.6% to ¥1,563.50, Sumitomo Mitsui advanced 1.2% to ¥9,839.0, and Mizuho Financial gained 2.4% to ¥3,210.0. 

Resource-linked stocks led the gainers in Tokyo trading after copper prices flirted near record highs. 

Inpex, Mitsubishi Materials, and Sumitomo Metal Mining advanced between 3.5% and 5%. 

Shin-Etsu Chemical gained 5.3% to ¥6,152.0 after the chemical company announced stock repurchase plans of 22 million shares not to exceed 100 billion yen before the end of November. 

At the end of April, the company had 1.99 billion outstanding shares, excluding 5.61 million held in the Treasury. 

Revenue in the financial year ending in March 2024 decreased 14% to 2.4 billion yen from 2.8 trillion yen, ordinary income dropped 22.8% to 787.2 billion yen from 1.02 trillion yen, and diluted earnings per share fell to 259.13 yen from 347.87 yen a year ago. 

Sumiseki Holdings Inc. jumped 20.5% to ¥2,354.0, and the stock extended the previous week's gain of 93% after the coal mining company reported its financial results last week. 

Revenue in the financial year 2024 declined 42% to 22.6 billion yen from 39.9 billion yen, ordinary net income soared 117% to 8.1 billion yen from 3.7 billion yen, and diluted earnings per share advanced to 124.94 yen from 59.33 yen a year ago. 

 

 

PBOC Holds Loan Prime Rates, Announces Measures to Facilitate Residential Property Market 

Market indexes in Shanghai and Hong Kong advanced and extended weekslong gains after the People's Bank of China announced measures to support the property market. 

The People's Bank of China lowered the down payment requirement, removed the floor on mortgage rates, and provided 300 billion yuan to regional authorities to buy unsold existing homes. 

China's central bank announced a total of 1 trillion yuan in additional financing for the property sector, which includes 300 billion yuan to support the regional government's move to expand affordable housing market activities.

The multi-prong move is likely to inject much-needed liquidity into the faltering property market, encourage buyers to acquire property, and support the regional governments' plans to provide more affordable housing. 

Benchmark indexes edged higher in Shanghai and Hong Kong in Monday's trading and extended gains of 5-week and 4-week, respectively. 

Economists and market watchers welcomed the central bank's supportive measures, but those steps are likely to fall short of reviving consumer confidence and repairing the balance sheets of troubled real estate companies. 

In addition, on Monday, the People's Bank of China left its two key lending rates steady after announcing measures to revive the property market. 

The one-year loan prime rate was held at 3.45%, and the five-year loan prime rate was held at 3.95%, meeting financial market expectations. 

A five-year rate is used as a reference rate for setting the mortgage rate, and a one-year loan prime rate is the guiding rate for consumer and business loans. 

 

China Stock Movers

The CSI 300 index added 0.2% to 3,685.63, and the Hang Seng index advanced 0.4% to 19,637.32. 

Property stocks advanced for the second day in a row after the announcement of supportive measures from the People's Bank of China. 

China Vanke soared 5.6% to HK$7.25, Longfor Group decreased 1.6% to HK$15.06, and China Resources Land edged up 0.5% to HK$32.90.

Henderson Land Development gained 3.2% to HK$27.30, and CK Asset Holdings advanced 1.6% to HK$36.35. 

Bank of China added 1.6% to HK$3.92, Agriculture Bank of China was unchanged at HK$3.81, ICBC inched higher 0.2% to HK$4.72, and HSBC Holding added 0.6% to HK$68.95. 

Tech stocks led the gainers in Hong Kong trading. 

Tencent Holdings decreased 1.4% to HK$394.60, JD.com advanced 3.2% to HK$138.20, and Meituan Holdings added 0.3% to HK$125.90.