US Markets Rally to Record Highs Amid AI Optimism, While Inflation and Geopolitical Risks Remain in Focus

index Update

US equities rallied sharply on Thursday, with the S&P 500 and Nasdaq reaching fresh record highs and the Dow Jones reclaiming the 50,000 level, driven by strong gains in AI-related technology stocks and optimism surrounding the US-China summit in Beijing. Investor sentiment was boosted by Cisco Systems’ stronger-than-expected outlook and Nvidia’s continued rally after the US approved shipments of H200 chips to select Chinese firms. Markets also reacted positively to signs of improving US-China relations, as Treasury Secretary Scott Bessent indicated both countries are considering faster approvals for certain Chinese investments and potential Tariff reductions on non-critical goods.

Market Movers

Among the top gainers, Leslie's, Inc. surged 144.76%, while Quantum Cyber N.V. 123.88% during the session. On the other side, REGENXBIO Inc. declined 37.80%, while Huachen AI Parking Management Technology Holding Co., Ltd. dropped 34.18%, making them the weakest-performing stocks of the day.

Commodities Update

Commodity markets remained highly volatile on Friday as escalating geopolitical tensions in the Middle East and persistent Inflation concerns continued to drive investor sentiment. WTI crude futures surged above $103.5 per barrel and Brent Crude climbed near $108 per barrel, putting both benchmarks on track for strong weekly gains, amid ongoing disruptions in the Strait of Hormuz following stalled US-Iran peace talks and continued shipping risks. The International Energy Agency warned that reduced crude and fuel flows through the Strait could leave global oil markets materially undersupplied through October, even if tensions ease. Meanwhile, precious metals came under pressure as accelerating US inflation reinforced expectations that the Federal Reserve may maintain elevated interest rates for longer, with some traders now pricing in a potential rate hike later this year. Gold fell below $4,600 an ounce and silver declined 6% to around $79 an ounce, additionally weighed down by weaker industrial Demand expectations and higher projected mine Supply in the silver market.

Macro Updates

Dollar Strengthens as Inflation Concerns Boost Fed Rate Hike Expectations

The US Dollar Index climbed to around 99 on Friday and was set for a weekly gain of more than 1%, as rising inflationary pressures reinforced expectations that the Federal Reserve could maintain higher interest rates or potentially raise rates later this year. Stronger wholesale and consumer inflation data, driven partly by higher energy costs linked to the Iran conflict, supported the dollar’s advance, while resilient consumer spending further strengthened the higher-rate outlook. Markets have now fully ruled out any Fed rate cuts this year, with some investors increasingly pricing in a possible rate hike by December. Investor attention also remained on ongoing high-level discussions between US President Donald Trump and Chinese President Xi Jinping, particularly after renewed geopolitical concerns surrounding Taiwan.

Bonds Commentary

The US 10-year Treasury Yield rose above 4.5% on Friday, reaching its highest level in a year, as rising inflation linked to the ongoing Iran conflict reinforced expectations that the Federal Reserve may keep interest rates elevated or potentially raise rates later this year. Stronger-than-expected wholesale and consumer inflation data, driven largely by higher energy costs, added to concerns over persistent price pressures, while resilient consumer spending further supported the higher-rate outlook. Markets have now ruled out any Fed rate cuts this year, with some investors increasingly pricing in a possible rate hike by December, while also closely monitoring ongoing discussions between US President Donald Trump and Chinese President Xi Jinping.

Futures Update

US stock futures traded lower on Friday as investors booked profits after recent record highs, while escalating Middle East tensions, rising oil prices, and mounting inflation concerns weighed on market sentiment. Persistent uncertainty surrounding the Strait of Hormuz and stronger inflation data fueled expectations that the Federal Reserve could keep interest rates elevated or potentially raise rates later this year, pushing the US 10-year Treasury yield above 4.5% to its highest level in a year. Despite the weaker Futures Market, major US indices closed sharply higher in the previous session, with the S&P 500 and Nasdaq Composite reaching fresh record highs and the Dow Jones reclaiming the 50,000 mark.

The market extended its rally on Thursday, with the Dow reclaiming the 50,000 level while the Nasdaq and S&P 500 hit fresh record highs. The S&P 500 has surged nearly 20% from its April lows, trading well above key moving averages and supported by solid Volume, reflecting strong bullish momentum. However, with RSI deeply overbought, the rally looks stretched in the short term, increasing the likelihood of a pullback or consolidation toward the 7,400–7,450 zone. While the overall trend remains firmly bullish, near-term caution is warranted before chasing further upside.