U.S. Stocks Trade Higher, The S&P 500 Aims To Extend A 6-Day Winning Streak

In the afternoon trading session, U.S. stocks demonstrated predominantly positive performance, following earlier indecisiveness, as a result of a rally sparked by indications that the Federal Reserve's interest rate hikes have contributed to taming inflation.

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The Dow Jones Industrial Average (DJIA) exhibited a gain of 47 points, equivalent to a 0.1% increase, reaching 34,455. Simultaneously, the S&P 500 rose by 9 points, or 0.2%, reaching 4,435. Conversely, the Nasdaq Composite slipped slightly by nearly 5 points, or less than 0.1%, settling at 13,778. According to FactSet data, as of the latest update, the Dow was expected to achieve a 1.7% increase for the week, while the S&P 500 was poised for a 3.2% gain, and the Nasdaq Composite was on track for a 3.9% advance.

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The positive trading trends for U.S. stocks persisted throughout the week, following the Federal Reserve's decision on Wednesday to refrain from further interest rate hikes. Saira Malik, Chief Investment Officer at Nuveen, noted that there is currently a significant amount of cash on the sidelines, as investors have been earning interest rates of around 4% to 5% from Treasury bills or certificates of deposits, all the while expressing concerns about an impending recession. Malik further emphasized that the widely discussed recession for 2023 has yet to materialize, resulting in a sense of FOMO (Fear of Missing Out) among investors.

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According to data, at the time of the report, the S&P 500 index had risen approximately 3% during the week, accumulating year-to-date gains of over 15%. Furthermore, the index had concluded higher for the past six consecutive days until Thursday, marking its lengthiest winning streak since November 2021, as stated by Dow Jones Market Data.

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The momentum continued as stocks surged following the Federal Reserve's announcement that it would halt interest rate hikes. However, the central bank's summary of economic projections indicated the possibility of two additional rate increases later this year in its ongoing efforts to bring high inflation down to its 2% target.

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Investors assessed remarks made by two Federal Reserve officials on Friday. Richmond Fed President Tom Barkin expressed the view that inflation remains excessively high and emphasized the need for convincing evidence of a more rapid deceleration before supporting an end to rate increases. On the same day, Fed Governor Christopher Waller noted that the consequences of several bank failures earlier in the year are likely to influence the central bank's decision regarding the extent of rate hikes.

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Edward Moya, Senior Market Analyst at Oanda, highlighted that U.S. stocks appeared fatigued after a week filled with impactful events that failed to hinder equities' momentum. He further noted that despite discussions of potential rate hikes, the S&P 500 experienced one of its strongest weeks since March. Moya suggested that the stock market rally might seem somewhat extended, but ample sidelined funds and the continued adherence to AI-driven trading indicate the potential for a further duration of this winning streak for mega-cap tech stocks.

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Citi's global strategists shared a perspective that the S&P 500's 15% gain, led by large megacap tech companies, should not be a cause for pessimism. They asserted that solely relying on breadth concerns is not sufficient reason to sell the market, adding that stocks typically register higher performance 12 months after leadership narrows.

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In terms of economic data from the United States, consumer sentiment rose in June to a four-month high of 63.9, reflecting a decrease in inflation and the resolution of the U.S. debt-ceiling dispute, according to the University of Michigan's index. The consumer sentiment index surpassed May's figure of 59.2.

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Moreover, the University of Michigan survey revealed a decline in consumers' inflation expectations. Americans now anticipate inflation to average 3.3% in the coming year, down from 4.2% in the May survey. Looking ahead over the next five years, consumers anticipate inflation to average approximately 3% annually.

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Thomas Simons, Money-Market Economist at Jefferies, suggested that the data released on that day would unlikely impact the likelihood of a July rate hike. Although the inflation expectations remain high, the encouraging aspect lies in the pace of change observed.

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