Tech giants power S&P 500 to new heights as Wall Street eyes the Fed

Wall Street started the week with a mood of cautious optimism. The S&P 500 edged ever closer to its all-time high, while the Nasdaq 100 reached a record close. It was a day when technology giants once again took centre stage, and investors kept one eye firmly on Washington, waiting for clues from the Federal Reserve.

Tech leads the charge as tensions cool

The story began with a sigh of relief. News broke that Israel and Iran had signalled an end to their aerial conflict, easing anxieties that had rippled through global markets. Oil prices dropped sharply, taking some of the sting out of inflation worries and giving equities room to breathe. Jim Reid, head of thematic research at Deutsche Bank, summed up the mood: “The significant rally in the market yesterday can largely be attributed to declining oil prices, which in turn suggests lower inflation, keeping the possibility of interest rate reductions alive this year.”

With energy costs falling, investors rotated back into growth stocks—especially the tech titans. Nvidia soared to new highs, fuelled by robust demand for its AI chips and bullish management commentary. Umesh S. Nathani, Senior Portfolio Manager at Goelzer Investment Management, noted, “Large technology and media companies once again carried much of the S&P 500’s weight with strong bottom-line growth. Management commentary around continued investments in data centre expansion and robust AI chip sales helped ease growing concerns about the sustainability of the AI-driven narrative.”

The numbers told the story: while the broader S&P 500 flirted with its record, the Nasdaq 100 powered ahead, driven by gains in Nvidia, Alphabet, and AMD. Yet, the Dow Jones lagged behind, weighed down by more traditional blue-chip names.

Investors watch the fed and brace for what’s next

As the market basked in the tech rally, attention shifted to Washington. Federal Reserve Chair Jerome Powell’s congressional testimony loomed large. Investors were eager for any hint about the Fed’s next move, especially with tariff-related inflationary pressures still in play. Powell had already signalled a cautious approach, but left the door open to rate cuts if inflation cooled or the labour market softened.

Market expectations reflected this uncertainty. According to the CME Group’s FedWatch tool, traders saw a 71% chance of a 25-basis point rate cut in September, and anticipated about 60 basis points of reductions by year-end. The stakes were clear: a dovish turn from the Fed could extend the rally, while hawkish signals might prompt a swift reset.

Yet, even with tech’s dominance, there were notes of caution. Nathani warned, “Longer term, we must remain mindful that markets tend to price in forward growth early. New risk factors in popular themes can lead to swift valuation resets. Balancing growth and valuation through a well-diversified portfolio remains key.”

The market’s mood, then, is one of cautious optimism. Tech stocks are leading the charge, but investors know the narrative can shift quickly. With geopolitical tensions easing and the Fed in focus, Wall Street is watching for the next chapter—ready to react, but not quite ready to relax.

Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.

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