Thursday recap: S&P 500 maintains momentum as Wall Street trades in green

The S&P 500 continued its positive momentum on Thursday after having reached record highs on Wednesday. Wall Street traded in the green, with the Nasdaq rising 0.2 percent.

The market's optimism was supported by strong earnings and the potential delay in rate cuts by the Federal Reserve, which boosted investor confidence in equities.

Previously on Wednesday, the U.S. dollar experienced a decline, stepping back from its nearly three-month peak against major currencies. The dollar only had gains against the yen and the franc at that time.

This shift was primarily driven by a decrease in U.S. bond yields, putting downward pressure on the dollar. Today, however, the greenback is showing signs of stabilization, while also extending its gains against the yen.

The U.S. Dollar Index (DXY), which measures the dollar against six key currencies including the euro, fell 0.13 percent to 104.08. This drop followed a 0.29 percent decline on Tuesday, contrasting sharply with the peak of 104.60 reached on Monday.

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The DXY faces pressure as buying weakens for a second consecutive session, following the upward spikes on Friday and Monday. This price movement indicates that investors might be trying to draw prices toward the 200-day moving average support at 103.590. This moving average forms a support cluster with 103.572.

The range between 103.572 and 103.590 holds significance for the longer-term trend as it also served as the trigger point for the recent breakout to the upside. Global equities also climbed to a more than two-year peak, with the MSCI world equity index gaining 0.59 percent after hitting its highest level since mid-January 2022.

Market highlights, Wall Street, and more

On Thursday, Wall Street’s major indexes experienced gains, with the S&P 500 nearing the 5,000-point milestone as investors responded to earnings reports. The S&P 500 edged up by 2.85 points, or 0.1 percent, to 4,997.91, while the Dow Jones Industrial Average increased by 0.1 percent to 38,726.33, and the Nasdaq composite advanced by 0.2 percent to 15,793.71.

While the 5,000-level milestone may not carry significant weight in a market driven by mathematical calculations and financial figures, it can provide a psychological uplift for a market influenced by emotions.

“It is a great reminder of how far we’ve come, and it wasn’t that long ago that everyone on TV was telling us about a near certain bear market and recession,” Ryan Detrick, chief market strategist at Carson Group, said.

Concerns persisted regarding the U.S. regional banking sector, with Moody Investors Service’s downgrading New York Community Bancorp to junk status due to funding and liquidity pressures. Although the KBW regional banking index reduced losses, it still closed lower, marking a decrease of over 5 percent for the month.

Chinese regulators intensified efforts to stabilize markets by imposing additional restrictions on short selling, while state investors announced expansions to their stock purchasing initiatives. Bloomberg News reported that President Xi Jinping is slated to discuss the stock market with financial regulators.

Treasury yield uncertainties

U.S. Treasury yields present a complex situation. While yields stabilized somewhat after the sale of new three-year notes, indirectly affecting the dollar, uncertainties remained regarding the Federal Reserve’s future monetary policy, particularly concerning the timing of interest rate cuts.

Comments from Federal Reserve Chair Jerome Powell suggested a cautious approach to rate cuts, possibly prolonging them at current levels longer than previously expected. This uncertainty prompted investors to reassess their Fed’s policy direction predictions.

Financial markets are currently adjusting, aligning expectations with the Federal Reserve’s policy signals. Positive economic data from the U.S., especially regarding inflation, could lead to earlier rate cuts, potentially weakening the dollar further.

Despite reduced expectations of a rate cut in March, the market hesitates to adopt long U.S. dollar positions fully. The upcoming U.S. inflation data, particularly next Tuesday’s release, is expected to be crucial in shaping expectations for Fed rate decisions.