Nasdaq Surpasses 17,000 for the First Time Amid Market Volatility | Daily Market Analysis

Key events:

• USA - FOMC Member Williams Speaks
• USA - Beige Book

Tuesday saw the Nasdaq reaching a historic high, surpassing the 17,000 mark for the first time ever. However, the index relinquished some of its gains later in the session as Apple's rally waned, though the strength in Nvidia helped mitigate downward pressure.

The Dow Jones Industrial Average experienced a decline of 300 points, equivalent to 0.8%, while the S&P 500 also saw a slight dip of 0.2%. In contrast, the NASDAQ Composite managed to eke out a gain of 0.3%. The Nasdaq had surged to a record level of 17,032.66 earlier in the session.

Despite Apple (NASDAQ: AAPL) reporting a 52% increase in smartphone shipments in China compared to the previous year, its stock failed to sustain gains.

Conversely, Nvidia (NASDAQ: NVDA) witnessed a remarkable surge of over 6%, propelling the tech giant's market value beyond $2.5 trillion. This surge followed Nvidia's impressive quarterly results, reaffirming its status as the third most valuable company on Wall Street.

Nvidia's latest quarterly results and optimistic guidance underscored the ongoing demand for chips, particularly in the realm of artificial intelligence.

Treasury yields edged higher amid growing expectations that the Federal Reserve won't be implementing rate cuts anytime soon. This sentiment was bolstered by data indicating a robust consumer outlook.

Unexpectedly, consumer confidence saw an uptick in May, according to the Conference Board survey released on Tuesday. This suggests a resilient consumer base, which serves as a key driver of US economic expansion.

Market participants are increasingly discounting the likelihood of a rate cut in September. According to the CME Fedwatch tool, traders are now pricing in a 50.7% probability that the central bank will maintain rates at their current level, with a 43.6% chance of a 25 basis point rate cut.

Ahead of Friday's release of the PCE price index data, which is closely monitored by the Federal Reserve for inflation trends, market expectations suggest a moderation in inflation. However, inflation is anticipated to remain above the Fed's target range of 2% annually.

The Japanese Yen continued to weaken on Wednesday, driven by a widespread market downturn and increased risk aversion. Additionally, dovish comments from Bank of Japan board member Seiji Adachi in a recent speech may have further pressured the JPY, supporting the USD/JPY pair.

Adachi highlighted the potential drawbacks of frequently altering monetary policy to stabilize foreign exchange movements, warning that significant interest rate fluctuations could disrupt household and corporate investments. He also pointed out that the BoJ has not yet consistently met its price target, emphasizing the need to maintain accommodative conditions.

Meanwhile, the Australian Dollar pared its daily losses following the release of a higher-than-expected Monthly Consumer Price Index on Wednesday. This strong data may prompt the Reserve Bank of Australia to consider another rate hike. Minutes from the RBA's May policy meeting indicated that the central bank had contemplated a potential interest rate increase.

Earlier in the Asian trading session, the Australian Dollar faced challenges due to heightened risk aversion, reflected in the stronger US Dollar. This strength in the USD is linked to rising US Treasury yields.

The USD/CAD climbed higher for the second consecutive day, trading around 1.3650 during the Asian hours on Wednesday. Increased risk aversion is driving investors toward the US Dollar, bolstering the USD/CAD pair. Additionally, falling crude oil prices are putting pressure on the commodity-linked Canadian Dollar, as Canada is the largest oil exporter to the United States, the world's biggest oil consumer.

Canada's Industrial Product Price Index rose by 1.5% month-over-month in April, surpassing market forecasts of 0.6% and reaching an eight-month high. This increase follows an upwardly revised 0.9% gain in March. Additionally, the Raw Materials Price Index jumped 5.5% month-over-month in April, compared to a previous rise of 4.3% and exceeding the expected increase of 3.2%.

The economic calendar for the week includes revised data on first-quarter economic growth on Thursday and the release of the Fed's Beige Book on Wednesday. Investors will also have the opportunity to hear from several Fed speakers throughout the week, including Governor Michelle Bowman, Cleveland Fed President Loretta Mester, Governor Lisa Cook, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic.