The Dow Jones industrial average rose on Friday, hitting a new record high to cap a strong week on the back of the U.S. Federal Reserve’s first major rate cut in four years.
The 30-share Dow added 38.17 points, or 0.09%, to close at 42,063.36, a new all-time high. The S&P 500 fell 0.19% to 5,702.55, while the Nasdaq Composite fell 0.36% to 17,948.32. On Thursday, the Dow topped 42,000 for the first time and the S&P 500 breached the 5,700 level.
All three major indices closed the week in positive territory. The S&P 500 rose 1.36%, posting gains in five of the past six weeks and is up more than 19% so far in 2024. The Dow rose 1.62% and the Nasdaq added 1.49%.
The market moves followed the Federal Reserve’s decision on Wednesday to cut interest rates by a significant half percentage point, the first cut since 2020.
The Fed’s speech this week could provide more insight into last Wednesday’s surprise decision.
On Thursday, Fed leaders will speak at the 10th annual US Treasury Market Conference.
Fed Chairman Powell will deliver pre-recorded opening remarks, followed by speeches from New York Fed President Williams and Vice President for Supervision Barr.
“Comments from these officials will be analyzed for clues about the direction of regulatory policy movement, as well as any update on how the Fed views progress in reducing its balance sheet,” Deutsche Bank strategists said in a note. .
On the economic front, key reports this week include Thursday’s final reading of second-quarter real GDP, expected to come in at a preliminary 3.0%, and Friday’s personal income data ( forecast +0.3% vs. +0.3% previously) and consumption (+0.3% vs. +0.5%) for August. Core PCE inflation data will also be released, forecast at +0.18% versus +0.16% previously.
“Stronger-than-expected economic data will be a boon for stocks. S&P 493 stocks should benefit from looser monetary policy and solid economic growth,” Yardeni Research wrote in a note on Monday.
“Bond holders may be less excited as long-term government bond yields will likely continue to rise in this no-recession scenario,” he added.
This week’s earnings take center stage: Micron and Costco
As September draws to a close, the final week brings a relatively light earnings schedule, although some highly anticipated reports are looming.
Most notably, semiconductor giant Micron Technology ( NASDAQ:MU ) and retail powerhouse Costco Wholesale ( NASDAQ:COST ) are set to release their financial results.
Micron, one of Nvidia’s key suppliers of AI memory chips, will report earnings on Wednesday, with analysts expecting a 90% year-over-year jump in revenue, fueled by growing demand for artificial intelligence memory chips.
While some Wall Street analysts remain bullish on the chipmaker, others recently cut their ratings on the stock and cut price targets, largely due to elevated inventory levels and signs of a slowing recovery in the memory market.
Additionally, earnings updates from companies such as Accenture (NYSE:ACN), BlackBerry (NYSE:BB) and AutoZone (NYSE:AZO) will also be in the spotlight.
What analysts are saying about US stocks
Oppenheimer: “We continue to expect that small- and mid-cap stocks could begin to rally more sustainably now that the Fed has begun to cut its benchmark interest rate. While we prefer equities over fixed income, we continue to view fixed income as complementary to equities and other asset classes in diversified portfolios when the duration matches investors’ goals, objectives and risk tolerance. Our target price for the S&P 500 this year remains at 5,900 points.”
Bank of America: “We are now past the Fed’s most uncertain day since at least 2015, with a best-case scenario of strong retail sales and a 50 basis point cut. In the absence of a big surprise in PCE, we don’t see any major macro data releases this week that could spook the market. Historically, quiet macro weeks are the best weeks for stocks (average return +0.61% vs typical +0.38%).
BTIG: “As we discussed on Friday, the looming false split at the FOMC did not materialize. We are still in a seasonally weak window and can expect some dilution, but we have to respect a new high in the SPX, along with the equivalent S&P 500. The S&P advance-decline cumulative line also continues to make new highs before price. While this does not rule out some near-term weakness, it typically bodes well for the medium term. High beta vs. low vol has seen a nice rebound, but has returned to a key resistance level. Clearing it would be another upward shift.”
Morgan Stanley: “The Fed made what we thought was the best short-term case for equities. Regularly, we move to a defensive neutral versus cyclical position as markets await more clarity on labor data. We continue to recommend a large-cap, quality bias.”
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Reference;
Karaahmetovic, V. (2024) Dow Jones, Nasdaq, S&P 500 weekly preview: New economic data could boost stocks By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/dow-jones-nasdaq-sp-500-weekly-preview-new-economic-data-could-boost-stocks-3627558 (Accessed: 23 September 2024).
