US: S&P 500, Nasdaq hit record closing highs amid trade negotiations, rate cut bets
[NEW YORK] Wall Street extended its rally on Friday (Jun 27), sending S&P 500 and Nasdaq to all-time closing highs as trade deal hopes fuelled investor risk appetite and economic data helped solidify expectations for rate cuts from the US Federal Reserve.
Stocks pared gains after US President Donald Trump terminated trade negotiations with Canada in response to its digital tax on technology companies.
Even so, all three major US stock indices posted weekly gains. Upon reaching its record closing high, the tech-heavy Nasdaq confirmed it entered a bull market when it touched its post 'Liberation Day' trough on Apr 8.
The blue-chip Dow remained 2.7 per cent below its record closing high reached on Dec 4.
'This market's been pretty resilient,' said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana. 'Investors are riding momentum and looking for breakouts.'
'They don't want to get caught on the wrong side of this thing,' Carlson added. 'Many investors already have missed out. And now you have the S&P flirting with an all-time high.'
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
The Personal Consumption Expenditures report from the Commerce Department showed consumer income and spending unexpectedly contracted in May. And while tariffs have yet to affect price growth, inflation continues to hover above the Fed's 2 per cent annual inflation target.
A separate report from the University of Michigan confirmed consumer sentiment improved this month, but remains well below December's post-election bounce.
Financial markets have priced in a 76 per cent likelihood that the Fed will implement its first rate cut of the year in September, with a smaller, 19 per cent probability of a rate cut coming as soon as July, according to CME's FedWatch tool.
Washington and Beijing reached an agreement to expedite rare-earth shipments from China to the US, a White House official said, well ahead of the Jul 9 expiration of the 90-day postponement of Trump's 'reciprocal' tariffs.
Additionally, US Treasury Secretary Scott Bessent said the administration's trade deals with 18 of the main US trading partners could be done by the Sep 1 Labor Day holiday.
The Dow Jones Industrial Average rose 432.43 points or 1 per cent to 43,819.27, the S&P 500 gained 32.05 points or 0.5 per cent to 6,173.07 and the Nasdaq Composite gained 105.55 points or 0.5 per cent to 20,273.46.
Among the 11 major sectors of the S&P 500, consumer discretionary enjoyed the biggest percentage gain, while energy shares were the laggards. Chipmaker Micron's MU.O upbeat forecast revived investor confidence in artificial intelligence-related stocks, while Nvidia NVDA.O rose 1.8 per cent, edging closer to US$4 trillion market capitalisation after reclaiming its position as the world's most valuable company.
Nike's shares NKE.N jumped 15.2 per cent after forecasting a smaller-than-expected drop in first-quarter revenue. Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the NYSE.
There were 347 new highs and 55 new lows on the NYSE. On the Nasdaq, 2,111 stocks rose and 2,342 fell as declining issues outnumbered advancers by a 1.11-to-1 ratio.
The S&P 500 posted 35 new 52-week highs and six new lows while the Nasdaq Composite recorded 101 new highs and 68 new lows.
Volume on US exchanges was 22.07 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days. REUTERS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
2 hours ago
- Straits Times
‘A stubborn mule': Trump encourages Powell to resign in latest attack on the Fed chair
US President Donald Trump continued his assault on the chair of the Federal Reserve on June 27, saying he would like Jerome Powell to resign. The president, who has berated Mr Powell for weeks, called the chair a 'stubborn mule' who has 'Trump derangement syndrome' for his refusal to immediately lower borrowing costs. 'I'd love for him to resign if he wanted to,' the president told reporters in the Oval Office. Such attacks have become a mainstay in Mr Trump's second term in the White House. The president, who elevated Mr Powell to Fed chair during his first term, has spent the past few weeks castigating him for not moving quickly enough to cut interest rates. Mr Trump has long been a fan of low interest rates, which make it cheaper for businesses and consumers to borrow and in turn fuel growth. He cajoled Mr Powell during his first term when he thought the Fed chair was taking too long to lower rates. But Mr Trump's interest in lower borrowing costs has taken on more significance this time around. He is pushing Republican lawmakers to approve an expensive tax cut package that would require the United States to sell large sums of debt to finance it. That goal has become harder – and more expensive – given that interest rates remain elevated in a range of 4.25 per cent to 4.5 per cent. Mr Trump has argued that the government would save 'billions' if the Fed lowered interest rates, calling for as much as an immediate 2.5-percentage-point decline. 'We have a guy that's just a stubborn mule and a stupid person that is making a big mistake,' the president said on June 27. The country is paying more to service its debts 'because we have a guy who's suffering from Trump derangement syndrome, if you want to know the truth,' he added. 'He's not good for our country.' The Fed has stuck to a 'wait and see' approach for months, with officials arguing that they can be patient before acting on further rate cuts because the labour market is still solid and inflation is at risk of flaring up again because of Mr Trump's policies. The central bank last lowered borrowing costs in December, after a series of reductions in the latter half of last year. Divisions between Fed officials have started to emerge however, with two Trump appointees recently making the case for interest rate cuts as early as July. Ms Michelle Bowman was recently elevated from her role as governor to head of regulatory issues at the central bank, while another governor, Mr Christopher Waller, is seen as a potential pick to be the next chair. Mr Trump recently said that he was choosing among three or four people to replace Mr Powell, whose term ends in May, and that an announcement would be coming soon. Other contenders include Mr Kevin Warsh, a former Fed governor who was almost picked to be chair during Mr Trump's first term; Treasury Secretary Scott Bessent; and Mr Kevin Hassett, a top economic adviser to the president. Asked on June 27 about his interest in the job, Mr Bessent said he would 'do what the president wants, but I think I have the best job in Washington'. The Fed is supposed to operate independently of the White House in order to ensure that officials can make tough choices on interest rates to keep inflation stable and the labor market healthy. Speaking with lawmakers this week, Mr Powell repeatedly stressed that politics did not factor into the Fed's thinking on interest rates. Those decisions are guided by the economic data, he said. Mr Trump has long sought to have a greater say over the direction of interest rates and has repeatedly toyed with removing Mr Powell as chair before his term expires. The Supreme Court recently signalled that the president was not authorised to do that, however. Mr Powell's term as a governor does not expire until 2032, meaning he could technically stay on even after stepping down as chair. Mr Bessent acknowledged that on June 28, saying: 'Chair Powell doesn't have to leave.' The next vacancy is set to open up at the end of January, when Ms Adriana Kugler's term as governor ends. If the administration chose to fill that spot with the next designated chair, Mr Bessent told CNBC, the nomination process could be completed in October or November. That timing is more in line with how it has been done historically. Selecting a replacement as early as the summer would risk muddying the Fed's communications and disrupting financial markets. Mr Trump said on June 27 that he expected whomever he picked to lower interest rates. 'If I think somebody's going to keep the rates where they are, or whatever, I'm not going to put them in,' he said. NYTIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
4 hours ago
- Business Times
Mid-year insights: Opportunities amid globalisation's discontents
IN THESE days of waning US-centric investment, some investors are betting that US President Donald Trump's tariff rhetoric may not translate into action, while others pursue strategies tilted toward industrials-heavy nations that may be benefiting from increased defence spending. Either way, the tide turned decidedly global during the first half of 2025. Diversification vs tariff sensitivity Building upon lessons from the Russia-Ukraine war, the United Kingdom recently unveiled plans to significantly raise defence spending and accelerate the development of next-generation security capabilities. The notable rise tracks the trend we've seen in military expenditure across the globe, which reached US$2.7 trillion last year – an increase of 9.4 per cent in real terms from 2023. We believe this localisation of defence production should continue to spur job growth and revitalise smaller industrial centres. South Korea's market has also been lifted given its recent aerospace and defence company gains resulting from global expansion moves and expectations for increased orders on higher European defence spending. A leading South Korean aerospace company formalised its plan to establish a production base in Germany in addition to pursuing other projects in Poland, Romania and Canada, as it moves to strengthen its leadership in the sector. To date this year, South Korea's market saw exchange-traded fund (ETF) net inflows rise more than 121 per cent – higher than any other major Asian economy for the period. It has also widely outperformed the US market year-to-date, returning 21.3 per cent as measured by the Kospi Index (versus 1.1 per cent for the S&P 500 Index). We are optimistic that the recent landslide victory by South Korea's new president Lee Jae-myung can usher in a long-awaited political normalisation for Seoul, following months of political crisis stemming from the impeachment of the country's former leader in December. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Eurozone/Germany For the second half of the year, we foresee ongoing opportunities in Germany and the eurozone, which offer differentiated sector allocation compared to the tech-heavy S&P 500 Index. By contrast, Germany's information technology (IT) sector is its third largest. Similarly, the Stoxx Europe 600 Index holds top weightings in financials (around 23 per cent) and industrials (about 19 per cent) firms, with IT making up just 7 per cent of the index. Europe's stock market got an early boost in March when German officials proposed spending hundreds of billions of euros on infrastructure and defence, a notable departure from Berlin's reputation for fiscal austerity. In a significant turnaround for the long-sluggish market, the Stoxx 600 Index outpaced the S&P 500 by about 20 percentage points in US dollar (USD) terms at the end of May. Moreover, the US administration is considering taxing foreign owners of US assets from countries with 'unfair' tax practices, a move that could potentially discourage capital inflows and weaken the USD. This is leading investors to reassess their dollar exposure, particularly after April's simultaneous selloff in US stocks, bonds and USD, which revealed reduced diversification benefits. We believe a stronger euro, resilient corporate earnings and attractive valuations are making the region increasingly appealing, drawing investor attention back to the eurozone. Year-to-date, ETFs focused on the Europe region drew net flows of US$33 billion, bringing total net inflows to US$238.97 billion. Net ETF inflows have risen 19 per cent year-to-date. Germany's proposed infrastructure spending alone, by some estimates, may raise economic output by more than two percentage points per year over the next decade. Such comprehensive reforms stand to benefit not only its defence sector but the overall economy by stimulating job growth and key development areas such as manufacturing, green technology, and digital infrastructure. Titans of Latin America: Mexico and Brazil Notwithstanding the current uncertainties over tariffs facing steel industry exports to the United States, we believe Mexico should continue to benefit by capturing a disproportionate share of nearshoring opportunities. Whether Trump can justify his tariff policy in the courts remains to be seen, and steel duties facing Brazil and Mexico pose key risks, in our opinion. Mexico is also coping with a marked decline in remittances – a significant component to its economy – which recently registered their largest annual drop in more than a decade as US lawmakers mull taxing the transfers and continue with crackdowns on immigration. Last year, Mexico received nearly US$65 billion in remittances – roughly 3.5 per cent of its gross domestic product. An extended decline could affect consumption in Latin America's second-largest economy. Mexico's stock market, however, is heavily weighted toward sectors like consumer staples and communication services, known for their stable cash flows and reliable dividends, offering some resilience in uncertain times. In our analysis, valuations also appear attractive compared to historical averages: Over the past five years, the average 12-month adjusted price-to-earnings ratio for Mexican stocks was some 19 times. Currently, the S&P/BMV Total Mexico Index is trading at 12.6 times, based on forward earnings estimates. Brazil As companies continue to pivot to a 'China plus' strategy – maintaining operations in China while expanding production elsewhere – we believe Brazil may also be poised to benefit. China, Brazil's largest trading partner, is already shifting further demand for agricultural goods to Brazil, which was spared more of a direct hit in the tariff war as the country faces the lowest level of reciprocal US tariffs. President Luiz Inácio Lula da Silva's recent visit to Beijing resulted in planned investments and agreements of about US$4.8 billion, underscoring Brazil's growing economic ties with China. Despite the country's current fiscal challenges, we believe Brazil's strategic positioning as a key commodity exporter, particularly in soybeans and meat, should bode well for its economic growth. During the second half of this year, politics should weigh more heavily on Brazil's market with its 2026 presidential election coming into clearer focus. Given Lula's low approval ratings, concerns over his health (emergency brain surgeries and chemotherapy treatments) and age (81), there is speculation that fresh candidates may emerge and increase the potential for markets to react positively to any signs of change. Over the near term, we'll be keeping close tabs on the divergence of each country and region's unique characteristics as they highlight the varying opportunities and risks, especially amid Trump's particular approach to reciprocal policymaking, and underscore the need for more nuanced investment strategies. The writer is head of global index portfolio management at Franklin Templeton
Business Times
5 hours ago
- Business Times
Wealthy Silicon Valley investors in line for US$17 billion windfall in US senate Republican tax Bill
[NEW YORK] Silicon Valley's favourite tax break may be getting an upgrade. Venture capitalists, along with successful tech founders and early startup employees, already pay no taxes on billions of US dollars of gains annually, thanks to a lucrative and complicated provision called Qualified Small Business Stock, or QSBS. Now the carve-out could get even more generous in changes included in Senate Republicans' proposed tax and spending Bill moving through Congress. The once-obscure provision is the subject of 'every dinner conversation in Silicon Valley,' said Christopher Karachale, a partner at law firm Hanson Bridgett in San Francisco. 'It's already an exceptional benefit for people who take risks on startups.' Taxpayers claimed US$51 billion of QSBS gains in 2021, a record year for venture capital deal activity, according to a Treasury paper earlier this year, with the benefits skewed to a select group. While about 33,000 people reported QSBS to the Internal Revenue Service annually over the decade studied by Treasury, 90 per cent of the total income went to individuals reporting more than US$1 million of gains on eligible stocks. Shares qualify as QSBS if they're acquired early enough in a startup's life cycle and held for more than five years. Once sold, capital gains aren't taxed up to certain limits, which advisers to the wealthy have figured out how to stretch and multiply several-fold. With the right planning, a venture capital investor or founder can end up with hundreds of millions of US dollars of tax-free income. Now the QSBS break could get even better. Though it was not addressed in previous versions of US President Donald Trump's 'One Big Beautiful Bill,' Senate Republicans slipped into their version tweaks relaxing its complex rules. Taxpayers would be able to invest at later stages in startups and still get QSBS, cash out earlier and still get a partial benefit, and skip taxes entirely on up to 50 per cent more of their windfalls. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'I'm surprised' Critics say the QSBS provision is unnecessary and overly expensive. House Democrats proposed restricting the tax break in 2021. 'I'm surprised they're not killing this thing, but I guess the lobbyists did their work,' said Manoj Viswanathan, a professor at the University of California Law San Francisco who has studied QSBS. 'I just don't think it's worth it.' The Treasury projects the current QSBS break will cost the US$44.6 billion over the decade beginning in 2025. The Senate bill's proposed changes would boost that by another US$17.2 billion over that period, the Joint Committee on Taxation estimates. Defenders of the provision have spent several years pushing Congress to expand it, arguing it encourages innovation and risk-taking. 'It brings more capital off the bench and into the game that might otherwise go to different asset classes,' said Patrick Gouhin, chief executive officer of the Angel Capital Association. 'QSBS encourages long-term investment in high-growth startups across the country by lowering the cost of capital,' Bobby Franklin, president and CEO of the National Venture Capital Association, said in a statement. 'It tells investors and founders alike: building something new in America is still worth it.' Despite the name Qualified Small Business Stock, the vast majority of small businesses are not eligible. Only C-corporations issue stock that qualifies as QSBS. Service industries are generally excluded, and the break is most valuable for technology or biotech that can grow quickly and generate large capital gains. The Senate proposal would be a potential boon to investors in artificial intelligence and other hot areas. 'Stacking' strategy To qualify under current law, taxpayers must have obtained their shares in a C-corporation at an early stage, when it had less than US$50 million of gross assets, an accounting definition often significantly less than its valuation. People who hold QSBS for at least five years can avoid taxes on up to US$10 million of capital gains or 10 times their initial investment, whichever is more. An early investor who puts US$30 million into a startup, therefore, can theoretically receive US$300 million tax-free. Founders can maximise their initial basis, and thus their potential QSBS-eligible gains, by transferring intellectual property into a startup from a predecessor company. Through a process called 'stacking,' QSBS holders can multiply the benefits of the US$10 million exclusion as well. 'It's the biggest game in town,' Brian Gray, a partner at accounting firm Gursey Schneider in Los Angeles, said of the strategy. His clients typically set up six or seven trusts, each benefiting a different family member, to get up to US$60 million or US$70 million in tax-free gains rather than just US$10 million. Senate Republican lawmakers would turbo-charge those benefits. They would set a US$75 million limit on an eligible startup's gross assets, up from US$50 million, on QSBS issued after the bill is enacted. Maximum tax-free gains would jump to US$15 million, from US$10 million. Both limits would be adjusted for inflation starting in 2027. The bill would also make it easier for QSBS holders to exit their investments sooner than five years without forfeiting tax benefits, allowing them to exclude half their gain after three years and 75 per cent after four years. That will be valuable to serial entrepreneurs, according to Gouhin of the Angel Capital Association. 'This gives you an added incentive to turn that company as quickly as possible.' BLOOMBERG
