Wall Street traders sent stocks to all-time highs as bond yields fell, with traders looking at prospects for U.S. Federal Reserve rate cuts after Jerome Powell cited signals the U.S. is back on a disinflationary path.

For the first time in its history, the S&P 500 closed above 5,500 to extend a blistering 2024 rally that has left analysts scrambling to update their targets. It was the gauge’s 32nd record this year. Tesla Inc. surged 10 per cent to lead gains in megacaps, though Nvidia Corp. failed to gain traction. The Nasdaq 100 hit the 20,000 mark, also notching a record high.

Equities have defied doomsayers amid solid corporate earnings, the artificial-intelligence mania and expectations that interest rates will decline in 2024. The lack of any meaningful pullback has given bulls conviction that the rally is sustainable.

The S&P 500 will rally to new peaks by the end of the year as economic strength outweighs market risks, according to Lori Calvasina at RBC Capital Markets. She raised her year-end target to 5,700 from 5,300 — among the highest on Wall Street — despite the fact that the market has “gotten a bit ahead of itself.”

“Our suspicion is that 2024’s economy will end up being strong enough to justify a strong move in the S&P 500 for the year as a whole,” Calvasina said.

The record-setting surge in U.S. equities, driven chiefly by American technology behemoths, is once again igniting comparisons to prior boom-and bust cycles on Wall Street. But parallels to the dot-com era and stock-market frenzies of the past are so far exaggerated, if history is any guide.

While the S&P 500 has posted an 85 per cent advance since 2019, even despite some drawdowns over the period, major bull runs of the 20th century dwarf that return. The U.S. stock benchmark soared 220 per cent in the last five years of the Internet bubble at the turn of the century, according to Bloomberg Intelligence data, and 238 per cent in the same-period stretch of the Roaring Twenties.

Deutsche Bank AG strategists expect U.S. earnings to rise by an above-average 13 per cent for the second quarter, driven by megacap growth and tech stocks. The outlook is for a sixth straight quarter of above average beats. 

However, the team led by Binky Chadha expects market reaction to be subdued as stocks have rallied in the run-up to the season.

Data Tuesday showed job openings unexpectedly rose, interrupting a trend that underscored a slowdown in labor seen as key for Fed easing. Powell said there’s been a “substantial” move toward better balance between the supply of and demand for workers. He described the job market as strong, but said it is cooling off appropriately so.

To Krishna Guha at Evercore, Powell’s comments were notably upbeat on inflation progress — while also incrementally careful on the balance of risks and employment.

“There was no explicit signal on cuts, but these were assessments that would plausibly support a cut in September,” Guha said.

Wall Street is now gearing up for a slew of economic data that will hit the tape on Wednesday — when the market closes early ahead of Thursday’s holiday. That’s ahead of the all-important U.S. payrolls reading due Friday. Economists expect the report to show employers added about 195,000 payrolls in June and the unemployment rate held at 4 per cent.

To Jose Torres at Interactive Brokers, the next three months of inflation reports will be crucial for both investor sentiment and policymakers’ timing for turning dovish. 

“June will likely show continued disinflation, but the potential results for July and August are less clear, raising the question of how many months of favorable data are needed before the Fed moves,” he noted.

Corporate Highlights:

• Novo Nordisk A/S and Eli Lilly & Co. fell as President Joe Biden demanded price cuts on their weight loss and diabetes drugs. Separately, Lilly won U.S. approval for an Alzheimer’s treatment.
• Lennar Corp. and D.R. Horton Inc. dropped after being downgraded by Citigroup Inc. on concerns about a “sluggish” housing market.
• Paramount Global is in exclusive talks to sell its Black Entertainment Television network to buyers that include BET Chief Executive Officer Scott Mills and Chinh Chu, who runs the New York-based private equity firm CC Capital.
• PG&E Corp. cut power to about 2,000 homes and businesses in Northern California as triple-digit temperatures, strong winds and low humidity heightened the risk of wildfires.
• Robinhood Markets Inc. is considering offering cryptocurrency futures in the US and Europe in the coming months, according to people familiar with the commission-free investing and trading platform’s plan.

Key events this week:

• China Caixin services PMI, Wednesday
• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
• U.S. Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
• Fed’s John Williams speaks, Wednesday
• U.K. general election, Thursday
• U.S. Independence Day holiday, Thursday
• Eurozone retail sales, Friday
• U.S. jobs report, Friday
• Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose one per cent
• The Dow Jones Industrial Average rose 0.4 per cent
• The MSCI World Index rose 0.5 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.2 per cent
• The euro was little changed at $1.0746
• The British pound rose 0.3 per cent to $1.2686
• The Japanese yen was unchanged at 161.46 per dollar

Cryptocurrencies

• Bitcoin fell 2.2 per cent to $61,874.51
• Ether fell 1.5 per cent to $3,410.95

Bonds

• The yield on 10-year Treasuries declined four basis points to 4.43 per cent
• Germany’s 10-year yield was little changed at 2.60 per cent
• Britain’s 10-year yield declined three basis points to 4.25 per cent

Commodities

• West Texas Intermediate crude fell 0.4 per cent to $83.03 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.