What Exactly Happened in the Stock Markets Yesterday?

Stock markets

We saw a sharp rally in US markets yesterday. The S&P 500 (SPY) gained almost 1.0%. Markets have been on an upward trajectory this month after losing ground in May. Microsoft (MSFT) gained 1.7% yesterday and is up 9.3% for the month. Microsoft’s market capitalization crossed $1 trillion this month.

Apple (AAPL) and Amazon (AMZN), which also flirted with the $1 trillion market capitalization last year, are still below the threshold. However, amid the broader market rally, both these stocks have also been on the rise. Apple gained 2.4% yesterday while Amazon rose 0.81%. NVIDIA (NVDA) also saw an upwards price action of 5.4%. So, what exactly drove stock markets yesterday?

Europe looking at more stimulus

Yesterday, European Central Bank President Mario Draghi hinted at more stimulus amid the region’s sagging economic growth. While the move lifted markets, President Trump wasn’t very happy. Meanwhile, markets are expecting Federal Reserve Chair Jerome Powell to take a dovish stance. The Federal Reserve meeting is currently underway and will conclude today. To be sure, the Fed already halted its rate hikes earlier this year. Now, markets expect the Fed to cut rates sometime this year.

Positive comments on US-China trade talks also lifted markets yesterday. US-China trade relations nosedived last month after the two sides increased tariffs on each other’s goods. However, yesterday, President Trump tweeted after “a very good telephone conversation with President Xi of China” that the two leaders would be meeting at the upcoming meeting. He also said that the negotiating teams would resume talks prior to the meeting. Notably, as early as Monday there wasn’t much hope from the proposed meeting.

Optimism over US-China talks and a supportive Federal Reserve helped drive the markets yesterday.