U.S. Markets Advance Amid Fed Rate Cut Hopes, Geopolitical Calm, and Tech Strength

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Index Update:  U.S. stock futures rose, with all major indexes up around 0.4%, following a record close for the Nasdaq 100. Gains were driven by easing geopolitical tensions, optimism over potential Fed rate cuts, and strong tech earnings. Reports that President Trump may soon announce a dovish-leaning Fed Chair nominee added to the momentum. Investors are also watching upcoming economic data, while Micron and Nvidia led tech sector gains on robust AI-related demand.

Market Movers:  On Wednesday, the top gainers were Urgent.ly Inc (+82.37%), followed by XCF Global, Inc (+32.75%). On the contrary Torrid Holdings Inc (-38.24%) and Surf Air Mobility Inc (- 29.44%) declined the most the same day.

Commodities Update:  Crude oil prices remained flat, with WTI around $64.8 and Brent near $68 per barrel, as markets stabilized following eased tensions between Israel and Iran. The risk of supply disruption in the Middle East has diminished with the ceasefire holding, though U.S. pressure on Iranian oil exports continues. Despite strong demand, the market remains well supplied due to higher OPEC output and record U.S. shale production. U.S. crude inventories dropped significantly, and attention is now on the upcoming OPEC+ meeting that will determine August production policy. Gold prices climbed above $3,340 per ounce, supported by a weakening U.S. dollar and growing expectations of dovish monetary policy. President Trump’s potential replacement of Fed Chair Powell with a more accommodative leader, along with Powell’s own comments suggesting disinflationary impacts from softened tariffs, boosted the outlook for looser financial conditions. Global central banks have also moved toward rate cuts, while reduced geopolitical tensions limited further upside for gold.

Macro Update:  President Trump indicated he is considering “three or four” candidates to potentially replace Fed Chair Jerome Powell when his term ends in 2026, though he did not name anyone. Reports suggest Kevin Warsh, Kevin Hassett, Christopher Waller, and Scott Bessent are top contenders. While Trump has denied plans to fire Powell, speculation persists due to his ongoing criticism of Powell’s rate policies.

Dollar Commentary:  The U.S. dollar index dropped to a three-year low near 97.5, pressured by easing geopolitical tensions, rising expectations of Fed rate cuts, and growing fiscal concerns. A stable Iran-Israel ceasefire and upcoming U.S.-Iran talks supported risk sentiment, while Fed Chair Powell signaled steady rates for now but noted easing would have continued without tariff-related inflation risks. Markets anticipate over 60 basis points of rate cuts by year-end, with focus shifting to upcoming trade talks and fiscal negotiations in Congress.

Bonds Commentary:  The 10-year U.S. Treasury yield fell to 4.28%, its lowest since early May, as expectations grew for earlier Fed rate cuts. Market sentiment was influenced by speculation that President Trump may soon announce a dovish Fed Chair nominee, potentially pressuring for more accommodative policy. While Powell maintained a cautious stance in recent testimony, he suggested that without tariff-related inflation risks, the Fed might have already eased further. Markets are now pricing in 62 basis points of cuts by year-end.

Futures Update:  U.S. stock futures edged higher, with the S&P 500 nearing record highs, as markets remained steady following mixed trading in the previous session. Investor focus has shifted to upcoming inflation data, particularly the personal consumption expenditures price index, amid ongoing geopolitical developments and cautious commentary from the Federal Reserve regarding interest rate policy.

Stocks initially extended the rally seen at the beginning of the week on Wednesday before trading sideways throughout Thursday’s session. The S&P 500 dipped slightly by 0.04 points, closing at 6,092.15. From a technical analysis perspective, the index found support at the 20-period EMA and gradually moved higher, indicating the potential for a short-term upward trend. Additionally, the 14-period RSI remains in positive territory and near the midpoint, suggesting there is still momentum for further buying and potential gains. The key support level is approximately 5,944, with resistance expected around 6,300.