Forecast for the S&P 500: US stocks rise again, will the rally continue?

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The stock market showed strong bullish momentum as the S&P 500, Nasdaq 100, and Dow Jones 30 closed higher for the fifth consecutive day, supported by continued recovery in technology stocks.

Nvidia gained 2.5%, while Tesla continued its ascent with a 3.7% increase.

Yesterday, the S&P 500 rose by 0.07%, reaching a new record level at 5590.75.

Trading today started at $5634, potentially nearing a correction phase, which could lead to some volatility, especially following cautious remarks by Powell before Congress recently.

The market is awaiting today’s Consumer Price Index numbers, with expectations of further increases, although there is also a rising possibility of a significant correction.

Fundamental data currently doesn’t indicate confirmed negative signals, but May’s 4.8% gains and June’s 3.5% increases suggest a more cautious approach for July.

The market awaits the upcoming quarterly earnings season starting later this month. Despite uncertainties, including key economic data releases and the Federal Open Market Committee’s interest rate decision on July 31, expected to hold rates steady, bank stocks rose around 3% today, gearing up for the earnings season.

U.S. Treasury bonds remained somewhat stable after a strong $39 billion sale of 10-year bonds. Market pricing reflects anticipated rate cuts by the Federal Reserve in 2024, with the first possibly in September. The yield on 10-year Treasury notes fell to 4.28% from 4.30% last Tuesday and 4.70% in April, supporting stock prices.

Looking ahead, stock market volatility may increase amid U.S. political uncertainties, cautious and ambiguous statements from the Federal Reserve Chairman, and the start of the second-quarter earnings season. Today’s inflation report could cause sharp fluctuations in bond and stock markets, with expectations of a 3.1% increase in consumer prices in June compared to last year, slightly slower than May’s 3.3% rate.

This week marks the unofficial start of the second-quarter earnings season, with Delta Airlines, JPMorgan Chase, and others reporting their spring quarter profits. Investors hope S&P 500 companies will achieve their strongest growth in over two years.

Outside Wall Street, Japan’s Nikkei 225 index rose by 0.6%, closing at a record level, up 25% so far this year, surpassing even the U.S. stock market rally, driven by AI tech stock frenzy. Japanese exporters benefit from the yen’s depreciation against the dollar, potentially boosting their earnings, in my view.