Wall Street inches towards all-time highs

Wall Street rallied as investors processed fresh indicators suggesting the Federal Reserve may cut interest rates as early as July, while awaiting additional economic data scheduled for release on Friday. The advance brought stocks within striking distance of record levels, with the S&P 500 closing just 3 points below its February high.

Stock surge followed the release of multiple U.S. economic reports, including a Labour Department announcement showing an unexpected decline in initial jobless claims for the week ending June 21st. This softening in labour market conditions reinforced investor confidence that the Fed could implement rate cuts in the near term.

Friday’s trading session is likely to be influenced by the personal income and spending report, which includes the Federal Reserve’s preferred inflation measures. Most global stock indexes appear positioned to conclude the week positively, with Middle East tensions and trade policy uncertainties temporarily relegated to secondary concerns.

Across asset classes—from equities, currencies and credit markets—the recovery from April’s market turbulence has proven remarkably robust. Nifty continued its upward journey for the fourth consecutive series, gaining 2.9% in the June derivative series. The Bank Nifty gained 3% in the June series to close at an all-time high level. We have seen the first sign of short covering by FPIs. However, out of their total positions, 62% are still on the short side, suggesting the possibility of more short covering in the July derivative series, which augurs well for the markets. Aggressive Put writing at 25000-25200 levels suggests strong support in that vicinity, while heavy concentration of calls at 26000 levels suggests strong resistance around 25800-26000 levels. Indian markets are poised to open with a flourish in line with global cues.

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Source : HDFC Securities Prime Research