Wall Street Optimism Sparks Asian Market Rally, S&P Eyes 10% Growth

Key Takeaway

• Asian stocks set to rise, buoyed by Wall Street's optimism and supportive jobs data hinting at potential Fed rate cuts.
• Treasuries gain with a 10-year yield drop of four basis points; dollar weakens, enhancing emerging market currencies.
• Oil and gold prices see fluctuations amid mixed US inventories report; S&P 500 projected to grow an additional 10%.

Wall Street's Optimism Drives Asian Stocks

Asian stocks are poised for gains following a positive day on Wall Street, fueled by supportive jobs data that bolsters the case for Federal Reserve rate cuts. Equity futures for Japan, Australia, and Hong Kong rose after the S&P 500 climbed 0.5%, nearing its all-time high. The Nasdaq 100 index also saw a 0.2% increase, indicating a positive sentiment in the market.

Treasuries Advance Amid Jobs Data

Treasuries advanced, reversing prior selling, with the 10-year yield down four basis points at 4.45%. A successful $25 billion sale of 30-year bonds highlighted investor confidence in US debt. The rise in initial US unemployment benefit applications, surpassing estimates, supports the case for interest rate cuts, as noted by Fed Bank of San Francisco President Mary Daly.

Dollar Weakens, Emerging Markets Benefit

Lower yields weakened the dollar, benefiting emerging market currencies, while the yen remained flat. The pound rose despite expectations of the Bank of England loosening policy. The market awaits key data releases in Asia, including household spending, industrial output, and current account balance figures.

Oil and Gold Prices Fluctuate

Oil gained for a second day, supported by key technical levels, while gold surged over 1% to $2,346 per ounce. The market digested a mixed US inventories report, influencing price movements in both commodities.

S&P 500's Potential for Growth

Doug Ramsey at Leuthold sees the S&P 500 potentially gaining another 10%, projecting a year-end target of 5,705 based on historical data. Apple Inc. and Nvidia Corp. made notable moves in the market, with Apple set to introduce AI features via its data centers. Blackstone Inc. President Jon Gray anticipates economic growth slowdown due to persistent inflation, impacting the Fed's rate-cutting decisions.

Street Views

• Chris Larkin, E*Trade from Morgan Stanley (Neutral on the market):

  "Time will tell whether it’s a one-off or part of a genuine cooldown in the labor market. Investors may have adjusted to the idea of the Fed waiting until September to cut interest rates, but that doesn’t mean they’re comfortable waiting indefinitely."

• Doug Ramsey, Leuthold (Bullish on S&P 500):

  "Another 10% gain in the S&P 500 isn’t out of the question, at least statistically."

• Jon Gray, Blackstone Inc. President (Cautiously Optimistic on economic growth and inflation):

  "We see a deceleration of growth... Central banks will be slow on the cutting of rates because they don't want to see a rise of inflation. The Fed will be patient; they’ll have the opportunity to cut once this year."

• Joe Kalish, Ned Davis Research (Neutral on US Treasury notes and bonds):

  "If the economy is slowing, unemployment rising, inflation receding, and the Fed is expected to cut rates, there will be plenty of buyers for US Treasury notes and bonds... But make no mistake. When conditions change, prices can change too – and quickly!"