(Bloomberg) — A rally in shares of semiconductor makers pushed stocks closer to new record highs as traders bet a potential Federal Reserve interest-rate cut will continue to fuel the industry that has powered the market rally this year.
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The S&P 500 approached the historic 5,500 level. Nvidia Inc led semiconductor stocks higher after one of its most bullish analysts predicted the artificial intelligence leader’s market value could reach almost $5 trillion over the next 12 months, from about $3.3 trillion now. The company was the only large cap to rise on Tuesday. Treasuries were slightly higher.
Traders sifted through mixed economic data that showed U.S. industrial production rose in May, helped by a broad-based recovery in factory production, while retail sales barely rose and were revised down from the previous month, suggesting growing financial strain on consumers.
“So far, the economy is potentially capable of achieving a soft landing, especially if the Fed adjusts policy quickly as conditions change,” said Jeffrey Roach of LPL Financial.
Boston Fed President Susan Collins said the U.S. central bank should be patient in considering when to cut interest rates, despite recent positive data on inflation. New York Fed President John Williams told Fox Business the economy is “moving in the right direction” but declined to say when he would support cutting interest rates.
The S&P 500 was trading near 5480. Nvidia rose 2.5% after Rosenblatt Securities analyst Hans Mosesmann raised his price target on the chipmaker to $200, a Wall Street high, from $140.
The yield on the 10-year Treasury note fell 5 basis points to 4.23%.Traders are preparing for a $13 billion 20-year Treasury note offering.Around 10 borrowers are considering new debt offerings in the primary market for highly rated notes ahead of a U.S. holiday on Wednesday.
“Stock prices are rising without the help of lower interest rates as corporate profits and the economy continue to expand,” said Chris Zaccarelli of Independent Advisor Alliance. “Without the consumer, this bull market will stall, so investors need to look for increased consumer spending, not a major economic slowdown.”
Global investors are likely to continue pouring money into record-high stock markets, according to a Bank of America survey.
When asked which asset classes would benefit most from a reallocation of money market funds, 32% of respondents chose U.S. stocks. Another 19% said they would move their money into global stocks, and a quarter of respondents said they would buy government bonds.
For now, there’s no big question of tempering enthusiasm about a U.S. stock rally driven by a handful of tech stocks. But some investors are increasingly looking for ways to hedge concentration risk. The “Magnificent Seven” megacaps have contributed more than 60% of the S&P 500’s return this year.
While the benchmark has reached overbought territory, stock market breadth remains very narrow, with only 46% of stocks trading above their 50-day moving averages. The spread between market cap and the Relative Strength Index (RSI) for the equally-weighted S&P 500 is at its widest since at least 1990.
Company Highlights:
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Nvidia’s shares continue to hit record highs as demand for the company’s chips shows no sign of slowing, and company insiders have sold more than $700 million of stock this year.
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Electric-vehicle startup Fisker filed for bankruptcy on Monday, months after ceasing production of its only vehicle, the fault-prone Ocean SUV.
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Boeing quality inspectors have alleged that the company mishandled and lost hundreds of defective parts, some of which may have been in new 737 MAX planes, the latest whistleblower revelation pointing to possible wrongdoing at the company.
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Homebuilder Lennar Corp. reported better-than-expected orders but its trading outlook for the current quarter fell short of analysts’ expectations.
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Philip Morris International has halted online sales of Zyn, a popular U.S. nicotine pouch brand, after receiving a subpoena over flavored products banned in the District of Columbia.
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NextEra Energy Inc., one of the world’s largest renewable energy developers, plans to sell $2 billion in stock to raise funds for new energy projects and pay down short-term debt.
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Best Buy is preparing to launch one of its biggest products of the year: an artificially intelligent computer.
Major events this week:
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UK Consumer Price Index, Wednesday
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June 19th US National Holiday, Wednesday
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China loan prime rate on Thursday
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Eurozone consumer confidence on Thursday
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Bank of England interest rate decision on Thursday
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U.S. housing starts, initial jobless claims Thursday
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Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
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U.S. Existing Home Sales, Conference Board Leading Index, Friday
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Fed President Thomas Barkin to speak Friday
Some of the key market developments:
stock
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The S&P 500 was up 0.2% as of 12:11 p.m. New York time.
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The Nasdaq 100 index was little changed
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The Dow Jones Industrial Average rose 0.1%.
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The MSCI World Index rose 0.4%.
currency
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro was little changed at $1.0741
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The British pound was little changed at 1.2699 to the dollar
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The Japanese yen was almost unchanged at 157.78 yen to the dollar.
Cryptocurrency
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Bitcoin fell 2.8% to $64,510.43.
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Ether fell 2.8% to $3,413.52.
Bonds
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The yield on the 10-year Treasury note fell 5 basis points to 4.23%.
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German 10-year bund yields fell 2 basis points to 2.40%.
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UK 10-year government bond yields fell 7 basis points to 4.05%.
merchandise
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West Texas Intermediate crude rose 1.1% to $81.22 a barrel.
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Spot gold rose 0.4% to $2,329.10 an ounce.
This story was produced with assistance from Bloomberg Automation.
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