US stocks rallied on Tuesday as investors digested fresh commentary from Federal Reserve Chair Jerome Powell, who cheered the "disinflationary path" of recent economic data.

The S&P 500 (^GSPC) added more than 0.6% to close at 5,509, marking the index's first-ever close above 5,500. The tech-filled Nasdaq Composite (^IXIC) also notched a record close as it gained roughly 0.8% to close at 18,028. Meanwhile, the Dow Jones Industrial Average (^DJI) rose just more than 0.4%.

The move was largely driven by a rally in megacap tech. A 10% surge in Tesla (TSLA) after better-than-expected second quarter deliveries helped push the indexes to new highs, while Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL, GOOG) were all also up more than 1%.

Home prices have continued to hit new records despite rising inventory this year. Goldman Sachs analysts laid out three reasons why in a research note this week.

First, the new housing inventory is "heavily skewed toward homes under construction," Goldman Sachs analyst Vinay Viswanathan explains. But the reason for the backlog isn't overbuilding. It's that homes are taking longer to complete as a result of a shortage of construction workers and supply chain disruptions for building products and appliances.

Second, construction activity has been mainly in metropolitan areas that have fewer land regulations, while areas with strict zoning are facing housing shortages. So new supply isn't really alleviating housing needs.

Third, rising new home supply has helped balance a lack of inventory in the resale market. This side of the market has been impacted by the so-called lock-in effect of homeowners securing ultracheap mortgages when rates were lower during the pandemic, which has caused owners to stay put.

“With strong demographic tailwinds for housing demand, we think housing supply is still imbalanced vs. demand, underpinning our economists’ forecast for the US homeowner vacancy rate to rise only gradually from 0.8% today to 1.1% by year-end 2024 (below the 2019 average of 1.4%)," the note said.

In recent weeks, we've highlighted commentary from several economists pointing out that recent cooling in the labor market could be the start of a more concerning trend.

In a speech on June 24, San Francisco Fed president Mary Daly also opined on the topic, noting that the labor market is moving toward a point where a "benign" slowing outcome could be less likely. Daly highlighted that further declines in job openings would likely come with an increase in the unemployment rate.

But recent data from the Job Openings and Labor Turnover Survey (JOLTS), didn't fuel those concerns. New data from the Bureau of Labor Statistics released Tuesday showed the job openings rate ticked higher to 4.9% from 4.8% the month prior. There were 8.14 million jobs open at the end of May, an increase from the 7.92 million job openings in April.

Economists surveyed by Bloomberg had expected the report to show 7.95 million openings in May.

Around the time the survey was released Fed Chair Jerome Powell spoke about labor market conditions during a panel in Portugal for a European Central Bank conference. Powell implied that any further softening in labor demand could be met with higher unemployment but added that if the unemployment rate merely moved “plus or minus a couple of tenths” from its current 4% rate, that would be a "good outcome.”

Powell added that the labor market isn't cooling too quickly, suddenly, or steeply. Instead, it's been “kind of what we were hoping to see, and what we have been seeing," Powell said.

Wall Street has high hopes for the upcoming earnings season, which will kick off in earnest with reports from big banks on July 12.

Consensus expects earnings to grow 9% from the year prior during the second quarter, which would mark the largest year-over-year gain since the fourth quarter of 2021. Given that expectations have been trimmed less than normal entering earnings season, Wall Street strategists have noted both earnings beats and stock pops following releases could be less frequent than normal.

"We expect the magnitude of EPS beats to diminish as consensus forecasts set a higher bar than in previous quarters," Goldman Sachs chief US equity strategist David Kostin wrote in a note previewing earnings season.

With the market trading near record levels entering earnings season, Kostin and other strategists are cautious about how much upside investors should expect following earnings that top Wall Street analysts' expectations.

Kostin notes that last quarter, companies that beat expectations outperformed the S&P 500 by 3 basis points in the following day of trading, well below the historical average of 100 basis points. Given investor sentiment is still elevated entering this round of earnings, Kostin reasons, "the reward for beats should be smaller than average this quarter, although not as extreme as during the 1Q season."

Deutsche Bank chief equity strategist Binky Chadha detailed a similar outcome in his research note previewing second quarter reports.

Chadha's work shows that the S&P 500 rises 80% of the time during earnings season with an average return of 2%. But Chadha noted, "On the other hand, the market run up into earnings season and overweight equity positioning argue for a muted rally."

Oil prices have been picking up as a Category 5 hurricane looms amid what some fear could be a "very active" hurricane season.

Yahoo Finance's Ines Ferre reports:

Oil prices remained near a two-month high on Tuesday as the first Category 5 hurricane of the season threatened to disrupt the markets and tensions in the Middle East showed no signs of abating.

West Texas Intermediate (CL=F) topped $83 per barrel while Brent (BZ=F) hovered above $86 per barrel in midday trading.

Traders are keeping a close eye on Hurricane Beryl in the Caribbean, the earliest Category 5 storm on record.

“The weather agencies are suggesting that this is going to be a very active hurricane season," TD Cowen managing director Jason Gabelman told Yahoo Finance on Tuesday.

"If [hurricanes] hit the Gulf Coast, it could disrupt that center of US refining capacity, which is about 50% of total capacity in the US," he said.

Analysts are keeping an eye out for Mexico's oil output. The country is responsible for about 5% of global production. Hurricane Beryl is expected to threaten Jamaica on Wednesday and continue toward Mexico's Yucatan Peninsula this week.

"Gulf Coast refineries import about 400,000 barrels per day of crude oil from Mexico, representing 25% of the crude oil that is imported into the Gulf Coast. Damage to the oil production facilities as well as to the export locations is a possibility," wrote Andy Lipow, president of Lipow Oil Associates, in a note on Tuesday.

Consumer Discretionary (XLY) led the gains in the S&P 500 (^GSPC) on Tuesday as Tesla surged roughly 9%.

Meanwhile, Health Care (XLV) was the biggest laggard, falling about 0.7%. Across the board, the major indexes were rather quiet on Wednesday. The Nasdaq Composite (^IXIC) led the gains, rising more than 0.2% and approaching a close at 18,000 for the first time ever.

More strategists are calling for a rise in the S&P 500 (^GSPC) during the second half of 2024.

RBC Capital Markets head of US equity strategy Lori Calvasina raised her year-end target to 5,700 from 5,300 on Tuesday.

"The story we see in our data for 2024 is that the stock market has gotten a bit ahead of itself from a valuation perspective, as well as on some of our sentiment work," Calvasina wrote. "But that some of our tools (including one of our sentiment models) do still point to the potential for the S&P 500 to move a little bit higher between now and year-end."

RBC's upgrade came with a boost to their earnings outlook which now sees $242 in earnings per share for the S&P 500, up from $237. The team also now sees margins expanding in both 2024 and 2025, as opposed to prior forecast of flat margins in 2024.

Still, Calvasina calls herself a “nervous and jumpy bull," noting economic certainty remains a key risk to her market call.

"We are mindful that there is a lot of fog in the 2H24-2025 outlook (specifically regarding the US consumer and election), that the US economy appears to be entering a soft patch, and that stock market volatility often picks up to some extent in Presidential election years," Calvasina wrote. "We assume any pullback will end up being a pothole on the path to recovery (off conditions that were close to a recession in 2022) that will get back on track before too long.

"But if we are wrong and the economic forecast takes a turn for the worse in the months ahead, or looks like it’s poised to do so in 2025, there is downside risk to our year-end 2024 call."

Federal Reserve Chair Jerome Powell spoke publicly on Tuesday for the first time since the Fed's preferred inflation gauge showed prices increased at their slowest pace in more than three years during the month of May.

While still showing signs of caution, Powell admitted the data has been in the right direction recently.

Yahoo Finance's Jennifer Schonberger reports:

Powell said Tuesday that he is encouraged by cooler inflation but reinforced that the central bank will need to see more evidence before cutting interest rates.

The last two inflation readings in April and May "do suggest that we are getting back on a disinflationary path,” Powell said speaking on a panel in Portugal for a European Central Bank conference.

Powell’s comments come days after the latest reading of the Fed’s preferred inflation target — the "core" Personal Consumption Expenditures (PCE) index — rose 2.6% in May, in line with expectations and down from 2.8% in April.

On a month-over-month basis, the inflation measure rose 0.1%, also in line with expectations and down from 0.2% in April.

The reading offered new support for rate cuts later this year, easing concerns that mounted during the first quarter that hotter-than-expected inflation could upend plans for a loosening of monetary policy in 2024.

Despite another positive signal that inflation is easing, the central bank isn't likely to cut rates at its next meeting in late July.

Powell declined to answer a question about whether the Fed could cut as soon as September.

Instead, he underscored the Fed will need more time and evidence that inflation is moving sustainably down to its 2% target, noting that the central bank can afford to be patient given a strong job market that is cooling gradually.

"We've made a lot of progress," said Powell. "We just want to understand that the levels that we're seeing are a true reading on what is actually happening with underlying inflation."

Job openings picked up in May, surprising Wall Street which had been watching for further signs of cooling in the labor market

New data from the Bureau of Labor Statistics released Tuesday showed there were 8.14 million jobs open at the end of May, an increase from the 7.92 million job openings in April.

March's figure was revised lower from the 8.06 million open jobs initially reported. Economists surveyed by Bloomberg had expected the report to show 7.95 million openings in May.

The Job Openings and Labor Turnover Survey (JOLTS) also showed 5.8 million hires were made during the month, a slight uptick from April.

The hiring rate held at 3.6%, unchanged from April. Also in Tuesday's report, the quits rate, a sign of confidence among workers, held steady at 2.2%.

Tesla stock (TSLA) jumped roughly 5% in early trading Tuesday after the electric vehicle maker reported quarterly vehicle deliveries that beat Wall Street expectations.

The EV giant delivered 443,956 vehicles during the second quarter, versus an analyst consensus estimate of 439,302 deliveries, per Bloomberg data.

“In the second quarter, we produced approximately 411,000 vehicles and delivered approximately 444,000 vehicles,” read a company statement. Broken down by car type, Tesla said it delivered 422,405 models 3/Y, and 21,551 other models.

That second quarter total delivery figure is higher than the 386,810 vehicles globally delivered in the first quarter but lower than the approximate 466,140 delivered a year ago.

US stocks retreated on Tuesday as investors cautiously weighed rate-cut odds ahead of crucial jobs data and eyed what higher chances of a Donald Trump win could mean for markets.

The Dow Jones Industrial Average (^DJI) slipped 0.1% while the S&P 500 (^GSPC) nearly 0.2%. The tech-filled Nasdaq Composite (^IXIC) slid more than 0.2%.

Meanwhile, political risk is preying on minds as Wall Street assesses what a Trump election win could mean for markets as speculation grows about Biden's future as the Democratic Party's standard bearer. The 10-year Treasury yield (^TNX) nudged lower to 4.43% on Tuesday after one of its largest single-day gains of the year on Monday.

Talk about a well-timed note from Evercore ISI tech analyst Mark Mahaney.

Mahaney nicely breaks down the investment thesis in Chewy (CHWY) the day after Keith 'Roaring Kitty' Gill disclosed a 6.6% stake in the company. He also shared some helpful survey analysis below.

Mahaney wrote:

Mahaney is sticking with an in-line rating for now, citing competitive pressures, valuation, and an unproven push into Canada.