CURRENCIES

Highlights from Last Week:

U.S. Dollar Decline: The DXY index dropped significantly due to softer-than-expected consumer price index figures. This reignited optimism that the disinflationary trend, which began in late 2023 but had stalled, is back on track.
Federal Reserve Speculation: Encouraging inflation data has fueled speculation that the Federal Reserve might ease its monetary policy sooner than anticipated, possibly this fall.
EUR & GBP Strength: The euro and British pound surged to multi-month highs against the U.S. dollar.
Precious Metals Rally: Gold is nearing its all-time high, and silver has reached its strongest level since 2013.

Upcoming Week:

Economic Calendar: A relatively light schedule is ahead, with the FOMC minutes and May S&P Global PMI results being the main highlights. This suggests that recent market moves may consolidate as investors wait for more significant catalysts.

UK Economic Focus:

April Inflation Data: Set to be released on Wednesday, this data could be crucial. A stronger-than-expected reading might reduce the likelihood of a Bank of England rate cut in June, while a subdued report could solidify expectations for such a cut.

STOCK MARKET

Key Highlights

Record-Setting Week for Stocks:

Signs of an inflation cooldown led to optimism about potential Federal Reserve interest rate cuts.
Major indices hit record highs:
- Nasdaq Composite (^IXIC) rose over 2%.
- S&P 500 (^GSPC) increased by more than 1.5%.
- Dow Jones Industrial Average (^DJI) surpassed 40,000 for the first time.

Upcoming Focus

Nvidia Earnings:

Highly anticipated earnings results from Nvidia (NVDA) are expected to be the key market catalyst.
Analysts expect Nvidia’s earnings to have grown by over 400% in the prior quarter, with revenue up 242%.

Other Earnings Reports:

Target (TGT), Palo Alto Networks (PANW), and Lowe’s (LOW) will also release earnings.

Economic Updates:

Updates on the manufacturing and services sectors.
Final reading of consumer sentiment for May.
Minutes from the Fed’s May meeting to be released on Wednesday.

Inflation and Interest Rates

Consumer Price Index:

Core prices rose 3.6% over last year, the lowest annual rise in three years.
Investors are now pricing in two full interest rate cuts this year.

Market Projections:

Investors aligning with the Fed’s projections of two or three rate cuts this year.
BMO Capital Markets expects the S&P 500 to end 2024 at 5,600, a 7% increase from the latest close.

Analyst Insights

Fed Meeting Minutes:

Expected to provide a deeper look at the discussion among officials.
Bank of America economist Michael Gapen suggests the minutes might sound more hawkish than Chair Powell’s press conference.

Equity Strategist Forecasts:

Deutsche Bank’s Binky Chadha raised his year-end target for the S&P 500 to 5,500 from 5,100, citing robust earnings growth and an improving macroeconomic outlook.

Nvidia’s Market Impact

AI Leader’s Performance:

Nvidia’s stock is up more than 86% in 2024 and over 200% in the past year.
High expectations for continued growth in earnings and revenue.

Broader Market Implications:

Nvidia’s performance could influence other AI-related stocks and the broader market.
Interactive Brokers’ Steve Sosnick notes the AI trade’s dependency on Nvidia’s continued success.

Expansion of the AI Trade

Sector Impact:

AI mentions soared in earnings calls, with significant growth in sectors like Energy and Utilities.
Dell shares rose about 10% due to bullish AI research from Morgan Stanley and Evercore ISI.

Strategist Views: