The S&P 500 Hits Record High as Fed Chair Powell Optimistic About Inflation Progress

Key Takeaways:

• The S&P 500 advanced 0.6% on Tuesday, July 2, 2024, rallying to a record close as Federal Reserve Chair Jerome Powell touted progress in the battle against inflation.
• Tesla shares soared, leading the S&P 500 for the second straight day after the carmaker topped quarterly delivery forecasts.
• Shares of pharmaceutical firm Incyte dropped following a downgrade from analysts at BMO Capital, who cited concerns about the company’s cash position.

After a slow start to Tuesday’s trading session, major U.S. equities indexes rallied in the afternoon. Investors were buoyed by Federal Reserve Chair Jerome Powell’s positive tone about signs of progress in the fight against inflation. Earlier in the day, the Job Openings and Labor Turnover (JOLTS) survey showed a higher-than-expected number of available positions in the U.S. economy, signaling sustained strength in the labor market.

Despite dipping into negative territory Tuesday morning, the S&P 500 came on strong to close the session 0.6%, closing above the 5,500 milestone for the first time in its history. The Nasdaq jumped 0.8%, lifting the tech-heavy index to its second consecutive record close. The Dow was up 0.4%.

Tesla (TSLA) shares drove 10.2% higher, notching a second consecutive day as the top-performing S&P 500 stock. The electric vehicle (EV) maker topped analysts’ forecasts with its second-quarter delivery figures. The company also said it will release its next earnings report after the markets close on July 23, which will provide deeper insight into its progress.

Shares of Paramount Global (PARA) jumped 5.7% amid reports that billionaire Barry Diller is considering an acquisition of the entertainment conglomerate. According to The New York Times, Diller’s firm IAC (IAC) signed a nondisclosure agreement with Paramount’s controlling shareholder National Amusements, which could be a precursor to acquisition talks. (IAC is the owner of Investopedia parent Dotdash Meredith.) Paramount’s negotiations with production firm Skydance Media fizzled out last month.

ON Semiconductor (ON) shares gained 5.4% after Wells Fargo reiterated its “overweight” rating on the chipmaker’s stock. Analysts believe the company is set to turn the corner and post strong revenue and earnings growth. ON’s ongoing restructuring plan and strong position in silicon carbide (SiC) chips underpin the firm’s bullish outlook.

Shares of nitrogen fertilizer producer CF Industries (CF) sank 3.5%, marking Tuesday’s weakest performance in the S&P 500. In its most recent earnings report released in May, the company reported year-over-year declines in revenue and net earnings. Additionally, natural gas prices have ticked lower over the past week, but they remain well above this spring’s lows. Natural gas is a key input in the nitrogen production process.

Shares of pharmaceutical firm Incyte (INCY) dropped 3.0% after BMO Capital downgraded the stock to “underperform” and reduced its price target. Analysts pointed to Incyte’s Dutch auction tender offer completed in May, arguing it has limited the company’s capacity to pursue acquisitions. The firm also expressed concerns about Incyte’s high levels of research and development spending, highlighting issues related to several previous R&D projects.

First Solar (FSLR) shares dropped 2.7% after Baird trimmed its price target on the stock. Although analysts believe the solar manufacturer remains well positioned to benefit from increased power demand from artificial intelligence (AI) power centers, they pointed to First Solar’s average selling price (ASP) and cost per watt forecasts as reasons behind their more moderate expectations.

In conclusion, Tuesday’s market performance was driven by optimism surrounding progress in the fight against inflation and strong earnings reports from companies like Tesla and Paramount Global. While some stocks experienced declines, overall market sentiment remains positive as investors continue to monitor economic indicators and corporate developments.

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