Title: US Dollar Edges Higher, S&P 500 Pulls Back from Record Highs, Silver Corrects After Strong Rally
By Chris Beauchamp | Original article published on IG.com
The US equity markets displayed mixed performance on Tuesday, with the S&P 500 and Nasdaq 100 stalling after hitting record highs. A harder tone in the US dollar, rising Treasury yields, and shifting sentiment in commodity markets led traders to reassess risk appetite in the near term.
Highlights:
– The S&P 500 retreats from record territory
– Silver prices undergo a sharp correction after reaching a 13-year peak
– USD/JPY climbs as Treasury yields rebound
– Market recalibration signals potential volatility ahead
S&P 500: Mild Correction After Reclaiming All-Time Highs
After a strong rally that pushed it to fresh intraday and closing records above the 5,470 level, the S&P 500 began to retreat on Tuesday. The prior upward move had been fueled by bullish sentiment around AI-related stocks and the continued resilience of the US economy, but the lack of a clear catalyst for immediate further gains left the market vulnerable to profit-taking.
Key Points:
– The index had risen over 15% year-to-date, driven by large-cap tech companies
– The slower Tuesday pricing suggested that traders were cautious ahead of key economic data expected later this week, including the PCE inflation report and GDP revision
– Market breadth remained narrow, indicating only a few sectors were participating in the rally
Technical Outlook:
– Immediate support can be found around 5,400, a critical zone the index had previously cleared with confidence
– A break below this level may send the S&P 500 toward the 5,360–5,380 consolidation zone from earlier in the month
– RSI indicators suggest the index was in overbought territory before the correction, providing further reason for the recent easing in momentum
The current pullback does not necessarily signal a reversal, but rather a natural pause in a trend that has seen limited substantive correction since March.
Silver Prices Retreat Sharply After Hitting 13-Year Highs
Silver’s recent rally to the highest levels since 2011 was met with a pronounced correction on Tuesday, with the precious metal falling more than 3% intraday. This drop followed a significant rise in recent sessions that had many analysts warning of overheating in the short term.
Factors Behind the Correction:
– A rise in the US dollar reduced the appeal of dollar-denominated commodities, including precious metals
– Real yields in the US moved higher, dampening the appetite for non-yielding assets like silver
– Increased short-term profit-taking after a technically overbought condition led to a surge in selling activity
Despite the pullback, silver remains in a long-term bull trend, underpinned by:
– Industrial demand from the clean energy and solar energy sectors
– Central bank purchases supporting broader precious metal markets
– Persistent inflation expectations and geopolitical uncertainties
Near-term price action could remain volatile as traders await economic data later this week. Key support lies near the $29.50 level, while a move back above $31.50 could re-ignite the upward momentum.
USD/JPY Rises with US Yields
After hovering near intervention territory in recent weeks, the USD/JPY pair began to climb decisively on Tuesday, drawing power from rising US Treasury yields and a broadly firmer greenback. The yen’s weakness has prompted growing speculation about when the Bank of Japan may be forced to respond more decisively to currency depreciation.
Drivers of the USD/JPY Upside:
– US 10-year yields rose above 4.25%, providing fresh bullish momentum for the dollar
– The divergence in monetary policy between the Federal Reserve and Bank of Japan remains wide, with few signs the BOJ is ready to tighten significantly
– BoJ minutes released earlier in the week highlighted internal discussions around slow inflation progress in Japan, enhancing expectations that
Explore this further here: USD/JPY trading.