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After Wednesday’s tech-led rebound amid the Federal Reserve’s rate decision, the stock market could be in for further gains. The major index futures point to a higher opening, although suggesting a slowdown in the upward momentum is in the cards. Despite Federal Reserve Chair Jerome Powell’s non-committal stance, the market has begun discounting a September rate cut. This is evident from the extended pullback in bond yields and the rally in dollar-denominated commodities. The imminent release of the July non-farm payrolls report could introduce some caution.
The market could receive support from positive reactions to Meta Platforms, Inc.‘s (NASDAQ:META) earnings even as it may choose to remain on “wait-and-watch” mode ahead of another batch of mega-cap tech earnings from the likes of Amazon, Inc. (NASDAQ:AMZN), Apple, Inc. (NASDAQ:AAPL) and Intel Corp. (NASDAQ:INTC).
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.34% |
| S&P 500 | +0.33% |
| Dow | +0.15% |
| R2K | -0.35% |
In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) moved up 0.31% to $547.16, and the Invesco QQQ ETF (NASDAQ:QQQ) rose 0.48% to $473.35, according to Benzinga Pro data.
Cues From Last Session:
U.S. stocks closed Wednesday’s session higher, with the S&P 500 and the Nasdaq Composite rising solidly amid positive reaction to tech earnings. The Dow Jones Industrials Averages saw some moments of anxiety but stayed mostly in the green before closing modestly higher. All three averages experienced some degree of volatility amid the Fed decision, rising sharply following the release of the post-meeting policy statement. They gave back much of these gains after Powell’s presser and yet closed firmly in the green.
As expected, the central bank used the July meeting to prepare the markets for a September rate cut, said Jeffrey Roach, chief economist at LPL Financial. The rate-setting committee noted a slowdown in the labor market and said Inflation continued to move into better balance.
Weighing in on Powell’s press conference, Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, said the chairman tried to strike a neutral tone. Powell explained “why today was too soon to cut rates, but effectively said that his base case was for a 25 bps rate cut even while leaving open the possibility that they may be forced to wait again (e.g. zero cuts) or even that they would move even more quickly (e.g. several cuts),” he said.
IT stocks rallied strong and hard, while communication services, consumer discretionary, industrial, material and utility stocks also gained ground.
| Index | Performance (+/-) | Value |
| Nasdaq Composite | +2.64% | 17,599.40 |
| S&P 500 Index | +1.58% | 5,522.30 |
| Dow Industrials | +0.24% | 40,842.79 |
| Russell 2000 | +0.51% | 2,254.48 |
Insights From Analysts:
Monica Guerra, Head of Policy, Morgan Stanley Wealth Management, said analysis of several key economic indicators suggests the Republican candidate may still have an edge in the November election. “Recent economic cooling may be a disadvantage for Democrats, with slower annualized first-quarter GDP growth of 1.3%, down from 3.4% in 2023's fourth quarter, corresponding to a 1.4% drop in the president's approval rating this year,” she said.
Still elevated prices and interest rates, which will likely remain high by historical standards even after the Fed cut rates, may not bode well for the Democratic nominee, she added
Guerra said the performances of different equity sectors also point to a Republican win. She noted that her team experimented with two equity baskets each containing 12 sectors and industry ETFs that could benefit from a Democratic or Republican win. “So far this year, the Republican basket (which includes sectors such as Energy, Materials, Utilities and Real Estate) has outperformed by 9% the Democratic basket (including solar energy, tech and infrastructure stocks). This suggests growing investor confidence in a GOP victory,” she said.
Upcoming Economic Data:
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Stocks In Focus:
Commodities, Bonds And Global Equity Markets:
Crude oil and gold futures extended gains and the yield on the 10-year Treasury note slipped 5.5 points 4.049%. Bitcoin (CRYPTO: BTC) pulled back below the $65K level.
Asian stocks closed on a mixed note, with the Japanese market retreating sharply on the yen’s strength post the Bank of Japan’s rate decision. The Chinese and Hong Kong markets fell modestly after disappointing Chinese manufacturing data. The rest of the major markets in the region rose, towing in line with the sentiment on Wall Street overnight.
The European markets were mostly lower in early trading as traders await the Bank of England’s rate decision due shortly.
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