Nasdaq Closes Above 10,000 for the First Time

What’s happening: The tech-heavy Nasdaq 100 index closed above the 10,000 milestone for the first time in its history after the US Federal Reserve kept rates unchanged.

What happened: The surge in large-cap technology stocks, most of which have helped people work from homes amid the coronavirus outbreak, powered the tech-laden index to a new record high.

In addition to keeping interest rates unchanged at near zero levels, the Fed assured investors that it does not intend to lift short-term rates till 2022 and will continue with its plans to buy bonds to aid the smooth functioning of the financial markets. Despite these reassurances, most major indices closed lower on Wednesday.

Why it matters: There was much excitement in the financial markets yesterday, especially among those day trading indices.

The Fed had cut its benchmark interest rates to near zero to provide relief to the financial market amid the covid-19 crisis. Although the decision to leave rates unchanged was widely expected, news of the FOMC’s (Federal Open Market Committee) unanimous vote to hold rates through 2022 was well received. The low interest rates encourage businesses and individuals to borrow funds in a depressed economy.

Investor concern was fuelled, however, by the central bank’s projection of the country’s GDP contracting by 6.5% this year.

It took 114 trading sessions for the Nasdaq 100 to climb from 9,000 to 10,000, representing the fastest 1,000-point rise since the 49-session rally from 4,000 to 5,000 in 2000. The Nasdaq has gained almost 12% this year.

Shares of Amazon, Apple, Tesla and Microsoft surging to their record highs helped the tech-heavy index spike on Wednesday.

The other major indices did not join Nasdaq in trading higher. The Dow Jones index declined 1% on Wednesday, while the S&P 500 closed lower by 0.5%.

What to watch: Investors will continue to keep an eye on the rise in coronavirus cases and deaths and news related to the reopening of the global economy. Wall Street may open on a downbeat note today, with stock index futures trading mostly lower in the Asian session.

Investors await the initial jobless claims and producer price reports from the US today. The number of people filing for jobless benefits is expected to have eased to 1.55 million last week, from 1.877 million in the previous week. Core producer prices are projected to decline 0.1% in May, versus a 0.3% drop in April.

Crude oil will be in focus today, after closing stronger in the previous session.

Context: Even after declining early in the session, oil futures closed higher on Wednesday. The gains later in the session were driven by weakness in the US dollar after the Federal Reserve announced plans to hold short-term interest rates at the current level through 2022.

Details: Crude oil posted losses earlier in the session following the EIA’s (Energy Information Administration) report showing a weekly increase of 5.7 million barrels in US crude inventories, versus expectations of a decline of 3.2 million barrels.

Gasoline supply also increased by 900,000 barrels, with distillate stockpiles rising 1.6 million barrels last week.

After falling as low as $37.73, WTI (West Texas Intermediate) crude for July delivery gained 1.7% to settle at $39.60 per barrel on the NYMEX (New York Mercantile Exchange). Global benchmark Brent oil for August also rose 1.3% to $41.73 a barrel.

July gasoline slipped 0.03% to $1.2099 a gallon, while July natural gas gained 0.7% to $1.78 per million British thermal units.

What to watch: Traders remain concerned about the oversupply of crude by non-OPEC (Organization of the Petroleum Exporting Countries) members, who are expected to end their voluntary output cuts by the end of June. With the rise in crude prices, some US producers may also reverse their production cuts, exerting pressure on oil prices.

Traders await the EIA’s weekly update on supplies of natural gas. Analysts are expecting an increase of 95 billion cubic feet in natural gas inventories for the latest week.

Other Markets: European indices trading closed lower on Wednesday, with the FTSE 100, French 40 and Dax 30 index down by 0.1%, 0.92% and 0.7%, respectively.

France’s payroll employment, Italy’s industrial production, South Africa’s gold production, mining production, manufacturing production and SACCI business confidence index, Mexico’s industrial production, Russia’s balance of trade and Argentina’s inflation rate.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.