S&P 500 Surpasses 5,500 as Tesla Soars and Rate Cut Hopes Rise | Daily Market Analysis

Key events:

• USA - ADP Nonfarm Employment Change (Jun)
• USA - Initial Jobless Claims
• USA - S&P Global Services PMI (Jun)
• USA - ISM Non-Manufacturing PMI (Jun)
• USA - ISM Non-Manufacturing Prices (Jun)
• USA - Crude Oil Inventories
• USA - FOMC Meeting Minutes

The S&P 500 closed above 5,500 for the first time ever on Tuesday, driven by a sharp rise in Tesla shares and optimism about potential rate cuts following Federal Reserve Chair Jerome Powell's positive comments on inflation progress.

The S&P 500 rose 0.7%, reaching a record close of 5,510.65, making it the 32nd record close this year. The Dow Jones Industrial Average increased by 147 points or 0.4%, and the NASDAQ Composite climbed 0.7% to a new high of 18,029.18.

Tesla Inc. saw a 10% surge after reporting second-quarter deliveries of 443,956 electric vehicles, surpassing the estimated 438,019.

Wedbush Securities highlighted the stronger-than-expected Q2 deliveries as "a huge comeback" for Tesla, suggesting the company has likely put its toughest challenges behind.

This delivery update arrives just weeks before Tesla's Q2 results on July 23 and its RoboTaxi Day on August 8, where the company is expected to showcase the next phase of its autonomous vehicle plans, according to Wedbush.

The Australian Dollar continues to gain ground for the second consecutive day on Wednesday. This upward trend is driven by the Judo Bank's Australia PMI figures, which showed a slight improvement in June.

Australia's Retail Sales, reflecting the country's consumer spending, rose by 0.6% MoM in May, up from a 0.1% increase in the previous month. This figure surpassed market expectations of a 0.2% rise.

Gold prices struggle to leverage the overnight rebound from around $2,319, remaining stuck within a tight range below the 50-day Simple Moving Average during Wednesday's Asian session. The metal has been trading within a familiar range over the past week as traders await more definitive signals regarding the Federal Reserve's policy direction before making new moves. Consequently, the focus is on the FOMC meeting minutes release later today, and the upcoming nonfarm payrolls report on Friday, both of which could shape expectations for the Fed's future policy decisions. These developments will likely impact near-term US Dollar demand and provide fresh momentum for gold.

Fed Chair Jerome Powell's dovish comments on Tuesday have bolstered expectations that the central bank might initiate a rate-cutting cycle later this year. This has resulted in a modest decline in US Treasury bond yields, putting USD bulls on the back foot and supporting gold prices. Furthermore, concerns about a global economic slowdown, ongoing geopolitical tensions, and political uncertainties in the US and Europe are expected to limit downside risks for the safe-haven asset. Given the mixed fundamental outlook, it's wise to wait for a clear breakout from the current short-term range before committing to a new directional move in XAU/USD.

The USD/CAD pair dipped to 1.3675 during early Asian trading hours on Wednesday, driven by a weaker US Dollar.

In Canada, manufacturing activity remained subdued in June, with new orders falling and firms cutting jobs for the first time in five months. The Canadian S&P Global Manufacturing PMI held steady at 49.3 in June, missing market expectations of 50.2. This marks the 14th consecutive month of contraction, the longest streak since records began in October 2010.

The USD/JPY pair is trading stronger near 161.40 after hitting a new high of 161.75 during early Asian trading hours on Wednesday. Market participants are closely monitoring potential foreign exchange intervention by the Bank of Japan, which could limit the pair's upside. Japan's final Jibun Bank Services PMI is due on Wednesday. In the US, the June ADP Employment Change, ISM Services PMI, and FOMC Minutes will be released.

The Japanese Yen has weakened further, influenced by the divergence in monetary policies between the Bank of Japan and the US Fed. Japanese authorities are worried about the impact of "rapid and one-sided" FX movements on the economy and might intervene in the FX market to prevent further depreciation of the JPY. This could provide near-term support for the Yen and pose a challenge for the USD/JPY pair.