US stocks continued their upward momentum on Wednesday, with the Dow Jones Industrial Average and S&P 500 reaching new record highs. Technology stocks led the way, with gains in major companies like Amazon and Apple, while investor sentiment remained buoyed by the Federal Reserve’s recent support for larger rate cuts. Despite lingering concerns over geopolitical tensions and a challenging economic backdrop in China, market participants remained optimistic about the potential for a smoother economic path ahead, setting the stage for a positive start to October trading.

Key Takeaways:

  • Dow Jumps 431 Points to Record Close: The Dow Jones Industrial Average surged 431.63 points, or 1%, to close at a record high of 42,512.00. This gain marks the second consecutive day of growth, driven by strength in the technology sector and positive sentiment following the release of the Federal Reserve’s September meeting minutes. 
  • S&P 500 Hits All-Time High: The S&P 500 climbed 0.7% to end at 5,792.04, reaching a new all-time high. Wednesday’s rally pushed the index into positive territory for October after a rocky start to the month. 
  • Nasdaq Advances Amid Tech Gains: The Nasdaq Composite rose 0.6%, closing at 18,291.62. Gains from Amazon and Apple, both of which rose more than 1%, played a key role in the index’s upward movement. Super Micro Computer was a standout performer, surging 4% as investors showed strong interest in technology stocks. 
  • Fed Meeting Minutes Support Larger Rate Cut: Minutes from the Federal Reserve’s September meeting revealed that a “substantial majority” of participants favoured a half-point rate cut. This larger-than-expected cut has bolstered market optimism, with investors viewing it as a sign of the Fed’s commitment to maintaining economic stability. The meeting minutes highlighted internal debate but ultimately leaned toward a more accommodative stance, providing a positive signal to markets.
  • European Markets Rebound: European stocks rebounded on Wednesday, with the pan-European Stoxx 600 closing up 0.66%, marking its best performance in two weeks. The FTSE 100 rose 0.65% to 8,243.74, while Germany’s DAX jumped 1% to close at 19,258, benefiting from stronger-than-expected export data and easing concerns over the energy market. France’s CAC 40 added 0.52%, driven by gains across all sectors, as investors focused on the upcoming US CPI data for further direction.
  • Asian Markets See Mixed Performance Amid Volatility: Asian markets experienced a volatile session on Wednesday, with China’s CSI 300 plunging 7.05% to close at 3,955.98, snapping a 10-day winning streak and marking its worst day since 1997. Investors were disappointed by the lack of new stimulus measures from Chinese policymakers, leading to a broad sell-off. The Hang Seng Index in Hong Kong fell 1.7% as investors took profits following recent gains. In contrast, Japan’s Nikkei 225 climbed 0.87% to 39,277.96, supported by optimism around tech stocks and resilient domestic demand. The Topix index rose 0.3% to 2,707.24. Meanwhile, Australia’s S&P/ASX 200 gained 0.13%, closing at 8,187.4, while South Korean markets remained closed for a public holiday. 
  • US Crude Oil Slips Below $74: West Texas Intermediate (WTI) crude oil for November delivery fell slightly, closing at $73.28 per barrel, down 0.39%. The recent pullback comes after a steep rally driven by Middle East tensions, which have now taken a backseat amid uncertainty over how Israel might respond to regional threats. Additionally, the lack of new stimulus from China has tempered demand expectations, leading to a stall in oil’s upward momentum. 
  • 10-Year Treasury Yield Rises to 4.07%: US Treasury yields climbed on Wednesday, with the 10-year yield rising to 4.073%, and the 2-year yield increasing to 4.022%. The uptick in yields followed the release of the Federal Reserve’s meeting minutes, which revealed internal debate over the extent of rate cuts. Investors also focused on the upcoming inflation data, which could influence the Fed’s next policy moves. The higher yields reflect a recalibration of rate expectations, as markets anticipate the potential for additional monetary policy adjustments amid a strong labour market and global economic uncertainty.

FX Today:

  • EUR/USD Struggles as Dollar Strengthens: EUR/USD remained subdued on Wednesday, settling near 1.0937 after facing resistance at 1.0942 earlier in the session. The pair failed to break above the 50-period SMA, currently positioned at 1.1037, which kept the bearish outlook intact. With upcoming US CPI data on the horizon, traders are wary of potential downside risks. A break below the key support area at 1.0900 could expose the pair to further losses toward the 1.0850 zone. On the upside, the 100-period SMA near 1.1091 remains a critical resistance level, and a sustained move above this could offer some relief for the Euro.
  • GBP/USD Holds Near Support as Dollar Remains Strong: GBP/USD ended around 1.3067 after dipping slightly from its daily high of 1.3076. The pair encountered selling pressure near the 1.3100 level, remaining below both its 50-period and 100-period SMAs, which are at 1.3202 and 1.3256, respectively. The inability to reclaim these levels has kept the overall tone bearish. Key support sits at 1.3050, and a breach below this could see the pair testing the psychological 1.3000 level. Conversely, a move above the 200-period SMA at 1.3201 could shift sentiment more positively, with targets set at 1.3300.
  • AUD/USD Struggles Near Support Levels: AUD/USD closed at 0.6712 after facing resistance at 0.6744 during the session. The pair struggled to maintain a recovery from recent lows, with sellers stepping in around higher levels. It remains below its 200-period SMA, currently at 0.6782, which reinforces the bearish pressure. A dip below 0.6680 could accelerate selling, targeting 0.6600 as the next significant support level. However, if the pair manages to reclaim the 200-period SMA at 0.6782, a short-term rebound toward 0.6830 could come into play, with traders watching US inflation data for further cues.
  • USD/JPY Extends Rally Above 149.00: USD/JPY climbed to 149.31, clearing the key 149.00 level for the first time since mid-August. The pair has shown resilience, bolstered by rising US Treasury yields, with the 10-year yield touching 4.073%. A break above the August 15 high of 149.39 could push the pair toward the psychological 150.00 level, with the next target at the 200-DMA of 151.39. On the downside, sellers would need to push the pair below the October 8 low of 147.35 to signal a reversal, with further support near 146.40-60.
  • Gold Declines as Treasury Yields Rise: Gold (XAU/USD) extended its losses, closing at $2,609.11 after failing to hold gains above $2,617 during the session. Higher US yields and the stronger dollar pressured the precious metal, with the 50-period SMA at $2,645 acting as a cap. Gold remains above the 200-period SMA, currently at $2,572, which serves as a crucial support level. A break below this level could open the door for further declines toward $2,575, while any recovery would need to clear the $2,645 resistance to target the $2,650 region.

Market Movers:

  • Astera Labs Soars on New AI Product Launch: Shares of Astera Labs jumped 15.6% on Wednesday after the company introduced its new fabric switches designed for artificial intelligence data centres. The launch was well-received by investors, highlighting Astera’s position as a key player in the AI hardware market.
  • Norwegian Cruise Line Rallies on Upgrade: Norwegian Cruise Line surged 11% following an upgrade from Citi, which raised its rating to “buy” from “neutral.” Citi’s analysts noted the potential for significant growth in earnings per share, citing a positive outlook for the company’s profitability and market expansion.
  • Arcadium Lithium Jumps on Acquisition News: Arcadium Lithium’s stock surged 30.9% after Rio Tinto announced it would acquire the company for $5.85 per share in an all-cash deal. The acquisition boosted Arcadium’s shares, while Rio Tinto’s stock saw a slight decline as investors weighed the acquisition’s impact on its balance sheet.
  • Helen of Troy Gains on Earnings Beat: Shares of Helen of Troy soared 18% after the company reported better-than-expected second-quarter earnings. The housewares maker posted earnings of $1.21 per share, exceeding analyst estimates of $1.05, on revenue of $474.2 million, which also surpassed the expected $458.9 million.
  • GitLab Rises on Positive Analyst Coverage: GitLab’s stock gained over 7% after Morgan Stanley initiated coverage with an “overweight” rating. Analysts cited GitLab’s comprehensive software delivery offerings as a key advantage in the competitive market, positioning the company as a potential leader in the software industry.
  • Boeing Falls Amid Union Strike: Boeing shares dropped 3% as the machinists’ union strike continued into Wednesday. The aerospace giant also faced a setback after withdrawing its contract offer following unsuccessful negotiations with union representatives. Additionally, S&P Global Ratings issued a negative outlook on Boeing’s credit rating, further pressuring the stock.
  • Alphabet Dips on DOJ Breakup Concerns: Alphabet, the parent company of Google, saw its shares decline 1.5% following reports that the US Department of Justice is considering a potential breakup of the tech giant. The news comes as regulatory scrutiny intensifies, raising concerns among investors about the future of Alphabet’s core businesses.

As the trading day concluded, investors appeared cautiously optimistic, driven by the strength in tech stocks and favourable signals from the Federal Reserve’s September meeting minutes. Despite ongoing concerns over geopolitical tensions in the Middle East and a challenging session for Chinese markets, US indices, including the Dow and S&P 500, reached record highs, lifted by hopes for a smoother economic path ahead. European markets also followed suit, posting solid gains, while Asian markets experienced mixed performance, reflecting regional uncertainties. With crucial US inflation data and earnings season just around the corner, market participants are bracing for potential shifts in sentiment that could shape the weeks ahead.