Stock Bulls Flash ‘Extreme Greed’ as S&P 500 Gains: Markets Wrap

(Bloomberg) — A rally in several big techs spurred a rebound in stocks, with Nvidia Corp. briefly hitting $4 trillion. Treasuries climbed after a solid $39 billion sale. Brazil’s real tumbled as President Donald Trump said the US will impose a 50% tariff on imports from the South American nation.

Equity traders brushed off trade angst to send the S&P 500 just a few points away from its record high. The CNN Fear & Greed Index is now signaling “extreme greed,” an indication of the market’s bullish momentum. A gauge of megacaps added 1.1%, with Nvidia extending this year’s surge to more than 20%. In another sign of risk appetite, Bitcoin topped $112,000 for the first time.

Trump unveiled a new round of tariff demand letters on Wednesday, with Brazil’s rate being one of the highest so far announced for the levies which are set to hit in August. He cited the treatment of former President Jair Bolsonaro in his letter to the nation, calling on authorities to drop charges against him over an alleged coup attempt.

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“Markets have moved into a period of calm despite a wave of trade headlines,” said Mark Hackett at Nationwide. “As the market reaction to the ebb and flow of tariff news has become muted, the next catalyst is earnings season. This handoff may come with some choppiness given the dramatic rally since April, the elevated expectations of investors, and the likely need for a period of consolidation.”

The Treasury market snapped a five-day selloff, with 10-year yields down six basis points to 4.34%. A sale of the bonds drew a yield of 4.362%, slightly lower than indicated by pre-auction trading just before the bidding deadline, indicating demand exceeded expectations. A $22 billion offering of 30-year debt is set for Thursday.

The emerging divide among Federal Reserve officials over the outlook for interest rates is being driven largely by differing expectations for how tariffs might affect inflation, a record of policymakers’ most recent meeting showed.

“While a few participants noted that tariffs would lead to a one-time increase in prices and would not affect longer-term inflation expectations, most participants noted the risk that tariffs could have more persistent effects on inflation,” the minutes of the Federal Open Market Committee’s June 17-18 meeting said.

While concern about the inflationary impacts of tariffs is one reason why the Fed has continued to postpone lowering rates, Chris Zaccarelli at Northlight Asset Management doesn’t believe this changes the dynamics in the bull market.

“Most investors believe that the economy is strong, corporate profits will be resilient and are eager to buy stocks, however, we believe more caution is warranted because we haven’t yet seen the impact of tariffs on corporate profits and consumer spending, because there have been so many delays in implementing them,” he said.

With the S&P 500 back at cycle-high valuations, the market seems to be signaling a robust appetite for risk, according to Hackett at Nationwide. This heightened sentiment likely reflects positive interpretation of recent data as supportive, he said.

The S&P 500 has repaired some of its technical damage, bolstered by impressive market leadership from industrials, financials, and the technology sectors, Hackett noted. 

“Nvidia’s march today as the first company to surpass a $4 trillion market cap is only the latest example of this,” he said.

Nvidia’s surge to the new milestone marked a stunning rebound following a rough start to the year, when spending fears sparked by China’s DeepSeek, along with Trump’s trade war, weighed on risk sentiment. The stock is up more than 1,000% since the beginning of 2023. Nvidia now accounts for 7.5% of the S&P 500, near its highest influence on record.

“Historically, megacaps have tended to continue their rallies after reaching various $1 trillion market cap thresholds,” according to Bespoke Investment Group strategists.

Fast-money investors are edging their way back into US stocks after sitting out a furious rally, bolstering the case for equities to extend their advance further into uncharted territory.

A BNP Paribas measure of equity positioning among investors including commodity-trading advisors, volatility-target funds and hedge funds has been steadily rising and now sits at just above neutral. That follows a monthslong rally that saw the S&P 500 rebound to new highs from the precipice of a bear market. The last time institutions were this light on stocks in the midst of a sharp recovery was in 2023, according to the bank.

“We believe the setup for equity markets looks bullish, even in light of renewed trade-war jitters,” said Craig Johnson at Piper Sandler. “While equities may come under some near-term pressure, investors are increasingly becoming numb to the tariff headlines and instead focusing on the trendlines.”

Just this week, Goldman Sachs Group Inc. strategists raised their outlook for US stocks, citing among other factors the continued strength in the largest US companies as reasons why stocks are likely to keep heading higher.

“If the script goes as planned and economic activity remains firm, corporate profitability remains solid (especially across tech), and the inevitable unexpected speed bumps in the road don’t throw the market off track too much, stocks have an opportunity to grind higher through year-end,” said Anthony Saglimbene at Ameriprise. 

Yet Saglimbene remarks there’s now an elevated risk of disappointment, “especially after seeing how quickly the overall investment narrative can change based on the constant barrage of White House announcements.”

Corporate Highlights:

• Microsoft Corp. was upgraded at Oppenheimer on Wednesday, adding to a growing consensus on Wall Street that the software giant is in a strong position within artificial intelligence.
• Apple Inc. thinks it is “too big to tariff, in some sense, and it’s used that line,” White House trade counselor Peter Navarro told Fox Business.
• France’s antitrust regulator said it notified Meta Platforms Inc. of a potential violation of competition rules relating to the online advertising sector.
• Merck & Co. agreed to buy respiratory drugmaker Verona Pharma Plc for around $10 billion as part of its ongoing search for ways to fill the Keytruda-sized hole that will emerge over the next few years.
• Meta Platforms Inc. bought a minority stake in the world’s largest eyewear manufacturer, EssilorLuxottica SA, deepening the US tech giant’s commitment to the fast-growing smart glasses industry, according to people familiar with the matter.
• Autodesk Inc. is weighing an acquisition of rival engineering-software provider PTC Inc., according to people familiar with the matter. PTC rose as much as 19% on the news.
• UnitedHealth Group Inc. promoted a new leader for the company’s Medicaid insurance segment, filling a role that was vacant after recent executive changes.
• Starbucks Corp. has received proposals from prospective investors in its China business, most of whom are eyeing a controlling stake in the operation, said people familiar with the matter.
• AES Corp., which provides renewable power to tech giants such as Microsoft Corp., is exploring options including a potential sale amid takeover interest, people with knowledge of the matter said.
• Samsung Electronics Co. introduced three new foldable smartphones in an effort to cement its grip on the category and broaden mainstream appeal before Apple Inc. debuts its first version next year.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.7%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World Index rose 0.7%
• Bloomberg Magnificent 7 Total Return Index rose 1.1%
• The Russell 2000 Index rose 1.1%
• Nvidia rose 1.8%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1718
• The British pound was little changed at $1.3594
• The Japanese yen rose 0.2% to 146.35 per dollar

Cryptocurrencies

• Bitcoin rose 2.9% to $111,832.69
• Ether rose 6.2% to $2,760.5

Bonds

• The yield on 10-year Treasuries declined six basis points to 4.34%
• Germany’s 10-year yield declined one basis point to 2.67%
• Britain’s 10-year yield declined two basis points to 4.61%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 0.4% to $3,315.09 an ounce

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