Markets Push Higher Ahead of Fed Decision; S&P 500 Hits New Record

Markets kicked off the week with strong momentum as the S&P 500 touched new record highs, fueled by solid corporate earnings and continued optimism around a soft landing. A notable slide in the U.S. dollar and strength in chipmakers helped lift broader sentiment, even as the Dow slipped on weakness in healthcare stocks. With a pivotal Fed decision and major tech earnings ahead, investor focus remains squarely on interest rate policy and forward-looking corporate guidance.

Key Headlines & Market Movers:

• S&P 500 Closes at Record Despite Weak Consumer Confidence: The S&P 500 extended its rally to a fifth straight session, brushing against the 7,000 mark, while the Nasdaq 100 climbed nearly 1%. However, the Dow fell sharply as UnitedHealth and other health insurers tumbled after regulators proposed smaller-than-expected Medicare Advantage payment hikes. Notably, over 80% of S&P companies reporting so far have topped earnings estimates, helping keep upward momentum intact despite consumer sentiment dipping to a 10-year low.

Dollar Drops to Multi-Year Low as Intervention Risk Grows: The U.S. dollar fell nearly 1% to its weakest level since early 2022 amid speculation of coordinated efforts to curb its strength—particularly against the yen. Traders are increasingly pricing in a scenario where the Fed holds rates steady longer than expected, and growing political pressure adds another layer of uncertainty. A weaker dollar continues to be a tailwind for risk assets and commodities.

Chip Stocks Lead as Micron, TSMC, Intel Rally: Semiconductor names surged, lifting tech benchmarks. Micron jumped nearly 7% after announcing a $24B expansion in Singapore tied to AI-related chip demand. TSMC and Intel also posted solid gains, buoyed by optimism ahead of tech earnings. While AI-related enthusiasm remains a theme, investors appear more discerning in picking sector winners, signaling a shift from blanket buying to more selective positioning.

Fed Meeting in Focus - Cautious Messaging Expected: Markets expect the Fed to hold rates steady on Wednesday, with futures pricing in the first cut by mid-year. With inflation cooling and job growth steady but not overheating, Fed Chair Powell is likely to strike a data-dependent tone. Analysts expect him to acknowledge easing inflation without committing to an imminent pivot. Any subtle shift in tone could influence both rate expectations and dollar direction in coming weeks.

S&P 500 Sector Performance

Looking Ahead

All eyes are on the Fed and the next round of tech earnings. Microsoft, Meta, and Tesla report Wednesday, followed by Apple Thursday and Amazon next week. Solid results from the Magnificent Seven could further reinforce bullish sentiment, especially if market breadth improves. Meanwhile, continued softness in consumer confidence and healthcare remains a risk worth watching, particularly if earnings disappoint in those areas. For now, momentum is with equities, but volatility may resurface if Fed commentary or corporate guidance underwhelms.

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