In a significant turning point in the financial markets, major US equity indexes experienced a notable increase on Friday, buoyed by rising crude oil prices, while the yields on government bonds displayed a mixed performance amidst volatile midday trading. The Nasdaq Composite Index rose by 0.5%, concluding the day at 16,740.7.
Simultaneously, the S&P 500 also advanced by 0.5%, reaching 5,345.4, and the Dow Jones Industrial Average climbed 0.3% to settle at 39,555.3. Notably, the technology sector spearheaded this broad-based rally, despite all three indexes having previously surrendered their intraday gains earlier in the trading session. Market volatility was highlighted by a significant drop in the CBOE's Volatility Index (VIX), which is often referred to as the 'fear gauge'.
The VIX fell by 10.3% to 21.33, indicating a decrease in market uncertainty. Moreover, the price of West Texas Intermediate crude oil reported a 1% increase, now priced at $76.95 per barrel. These gains in oil prices are occurring against a backdrop of heightened geopolitical tensions, particularly in the Middle East, where Israel awaits a response from Iran following the assassination of a high-ranking Hamas official in Tehran last week.
Following this event, Iran's senior leaders have vowed to retaliate against Israel for the aggressive airstrike, thereby threatening to escalate into a larger conflict that could disrupt oil supplies emanating from the Persian Gulf. Saxo Bank commented in a market note that, "As the sentiment-driven crude sell-off eases, traders have refocused their attention on supply risks, particularly those associated with the Middle East." On the fixed income front, Treasury yields exhibited a mixed reaction, characterized by the 10-year yield declining by 5.1 basis points to land at 3.95%.
In contrast, the two-year rate experienced a slight uptick of less than one basis point to reach 4.05%. Boston Fed President Susan Collins has reiterated the Federal Reserve's data-driven approach to monetary policy, suggesting that the possibility of rate cuts may be on the horizon, contingent on improvements in inflation data.
In an interview with The Providence Journal, Collins remarked, "So I would say, if the data continue along the trajectory I anticipate, I genuinely believe it will soon be appropriate to consider adjusting policy and softening the current restrictions of our monetary stance." During an event conducted by the National Association for Business Economics, three Federal Reserve Bank policymakers expressed confidence in the notion that inflation is cooling sufficiently to warrant possible interest rate cuts in the foreseeable future.
Investors are set to closely monitor next week’s anticipated consumer prices and retail sales data, which will provide fresh insights into a potential soft landing for the US economy. In the corporate sector, Akamai Technologies, denoted by the ticker symbol $AKAM, reported a significant surge in second-quarter non-GAAP earnings and sales that surpassed market expectations.
Furthermore, the company adjusted its earnings per share guidance for fiscal 2024 upwards. This optimistic report culminated in a remarkable 11% increase in shares during the trading day, making Akamai the top performer on the S&P 500. Conversely, Intel, represented by the ticker $INTC, faced a downgrade in its senior unsecured rating from Moody's, moving from A3 down to BAA1, attributed to growing concerns surrounding the chipmaker's profitability.
This prompted a 3.2% decline in Intel's shares during intraday trading, marking it as one of the worst performers on the S&P 500, Dow, and Nasdaq indexes. In the commodities market, gold prices saw a 0.5% rise to reach $2,474.50 per ounce, while silver experienced a minor decline of 0.1%, trading at $27.59 per ounce. In summary, the interplay between geopolitical influences, corporate earnings, and Federal Reserve policy considerations is creating a dynamic landscape for investors, with potential ramifications for the broader economic outlook..