Wall Street Weekly: Tech Stocks Lead S&P 500 to New Record Highs as Fed Rate Cut Expectations Heat Up

Market Overview: All Three Major Indices Rise, S&P 500 Hits New Record High

This week, U.S. stocks continued their strong performance, with the S&P 500 index reaching a new all-time high, driven by tech stocks. The Nasdaq Composite Index led the gains, while the Dow Jones Industrial Average also posted a modest increase. Market sentiment sought a balance between Federal Reserve policy expectations and economic data, as investor hopes for a rate-cutting cycle intertwined with concerns over inflation persistence, yet overall risk appetite remained elevated.

Tech Stocks Lead: The 'Dual Engine' of Apple and Nvidia

The Nasdaq index performed strongly this week, largely thanks to the robust rally in large-cap tech stocks. Apple (AAPL) shares extended their recent uptrend, with market optimism regarding its push into artificial intelligence and upcoming new product lines. Nvidia (NVDA), as the AI chip leader, continued to attract capital, with its data center business growth expectations pushing its stock to new highs for the period. Additionally, other heavyweight stocks like Microsoft and Amazon also posted significant gains, forming a 'leading echelon' for the tech sector.

According to industry analysis, the bullish case for tech stocks stems from two main factors: first, the acceleration of enterprise AI application deployment, boosting demand for both hardware and software; second, market expectations that the Federal Reserve will shift toward easing in the future, lowering financing costs for high-growth companies. However, some analysts also caution that current tech stock valuations are at historically high percentiles, warranting vigilance against profit-taking pressure.

Fed Policy Expectations: Timing and Pace of Rate Cuts in Focus

Several economic data releases this week provided new clues for the market. Data from the U.S. Department of Labor showed a slight increase in initial jobless claims, but the overall labor market remained resilient; meanwhile, the year-over-year increase in the core PCE price index was slightly below expectations, interpreted by the market as a sign of easing inflation pressures. According to the Fed's recent meeting minutes, most officials lean toward initiating rate cuts within the year, but the exact timing depends on subsequent data performance.

The CME Group's FedWatch tool shows that the market's probability expectation for a rate cut in September has risen to about 70%. This expectation has supported the stock market, particularly rate-sensitive tech and growth stocks. However, the Fed Chair emphasized in public remarks that there is 'no rush to act,' suggesting a cautious approach to decision-making. The tug-of-war between this 'dovish expectation' and 'hawkish rhetoric' has been a major source of market volatility this week.

Economic Data: Divergence Between Consumption and Manufacturing

May retail sales data released this week showed a 0.1% month-over-month increase, below the market expectation of 0.3%, indicating a slowdown in consumer spending. However, core retail sales, excluding autos and gasoline, remained positive, suggesting that services consumption is still active. In manufacturing, the June Philadelphia Fed Manufacturing Index unexpectedly turned positive, ending several months of contraction, with improvements in new orders and shipments indicators providing a boost to the industrial sector.

Housing data was mixed: May housing starts fell month-over-month, but building permits rose, reflecting developer confidence in long-term demand. Overall, the U.S. economy presents a picture of 'cooling consumption, stabilizing manufacturing, and a solid job market,' providing the Fed with a window for observation and further solidifying market expectations of a 'soft landing.'

Sector Rotation and Market Outlook

Beyond tech stocks, the energy sector performed prominently this week, boosted by a rebound in international oil prices, while the financial sector saw capital inflows amid stable rate expectations. Defensive sectors like utilities and healthcare lagged, indicating an increase in market risk appetite. Among S&P 500 index components, the number of advancing stocks exceeded 60%, showing improved market breadth.

Looking ahead to next week, investors will focus on the Fed Chair's congressional testimony and the June nonfarm payrolls report. If employment data shows an unexpected cooling, it could further strengthen rate cut expectations and push indices higher; conversely, if employment remains strong, the market may enter a short-term correction. Technically, the S&P 500 has broken through key resistance levels, but the RSI indicator is approaching overbought territory, so short-term pullback risks cannot be ignored.

Risk Warning

The above content is for reference only and does not constitute investment advice. The stock market carries risks, and investment should be undertaken with caution. The market analysis and views presented in this article are based solely on public information and reasonable inferences, and their accuracy or completeness is not guaranteed. Investors should make independent investment decisions based on their own risk tolerance.