Dow Jones futures experienced a slight uptick on Sunday evening, accompanied by a modest rise in S&P 500 futures while Nasdaq futures showed a slight decline. The spotlight is now on the upcoming Federal Reserve meeting, where it is anticipated that officials will implement rate cuts for the first time since the Covid-19 crisis struck in 2020.
Recently, the stock market demonstrated a remarkable rebound, with both the S&P 500 and Nasdaq composite achieving their best weekly performances of the year, successfully reclaiming their 50-day moving averages after a week of selling pressure. As the S&P 500 and Dow Jones indexes are nearing all-time highs, a plethora of leading stocks are signaling buy opportunities.
Investor sentiment is buoyed by anticipated Fed rate cuts and advancements in artificial intelligence, two significant catalysts propelling this year’s stock market rally. Nvidia’s CEO, Jensen Huang, highlighted the “incredible” demand for the company’s AI chips, stating that production of its next-generation Blackwell chips is proceeding at full throttle. This positive momentum has not only boosted Nvidia’s stock but also uplifted numerous AI-related stocks within the broader market.
Several major players like Arista Networks, Interactive Brokers, and DoorDash are currently sending out buy signals, alongside giants like Royal Caribbean, Meta Platforms, Sea, and Microsoft, totaling 25 stocks in buy zones as flagged in this analysis. It’s crucial for investors to capitalize on these buying opportunities, especially given the positive market conditions observed in recent days.
Futures indicate a rise in the Dow Jones by 0.2% compared to fair value, with the S&P 500 futures up by 0.1% and Nasdaq 100 futures slightly dipping. Additionally, crude oil futures have shown a slight increase.
Looking ahead to the September 17-18 Federal Reserve meeting, investors are keen on how deeply the Fed will cut rates. An official statement is expected at 2 p.m. ET on Wednesday, with Fed Chair Jerome Powell speaking shortly after at 2:30 p.m. ET. While a rate cut seems inevitable, debates linger around whether it will be a cut of 25 or 50 basis points. The markets have priced in potential cuts totaling up to 100 basis points by the end of the year, with over a 50% chance of 125 basis points.
Investors will also be analyzing the Fed’s updated dot plot, which will provide insights on future rate expectations, and will carefully assess Powell’s remarks for indications regarding the pace of subsequent rate cuts.
Last week’s stock market rally marked a substantial turnaround after a previous period of bearish sentiment. The Dow Jones Industrial Average saw an impressive gain of 2.6%, with the S&P 500 soaring by 4% and the Nasdaq composite marking an extraordinary 5.95% increase, representing their most significant weekly gains this year. The small-cap Russell 2000 also showed strength, climbing 4.4%.
The previous week saw the Nasdaq decisively drop below a critical low, creating bearish undertones. However, this past week brought a powerful turnaround, with the Nasdaq surging resilience, closing above its 50-day moving average on Thursday.
Both the Dow and S&P 500 approached record highs, while small-cap indexes such as the Russell 2000 and S&P MidCap 400 rallied after nearly testing their 200-day moving averages earlier in the week. Leading stocks, notably within the technology sector, displayed robust movements into buy zones throughout the week, indicating a fruitful opportunity for investors.
The drop in the 10-year Treasury yield, which fell 6 basis points to 3.65%, and a rise in U.S. crude oil prices, up by 1.45% to $68.65 a barrel, added to the positive market sentiment.
Growth-focused ETFs also saw substantial gains, with the Innovator IBD 50 ETF (FFTY) rising by 6.95%, while the iShares Expanded Tech-Software Sector ETF (IGV) jumped 4.8%, fueled by significant holdings like Microsoft. The VanEck Vectors Semiconductor ETF (SMH) spiked by 10.2%, highlighting Nvidia’s strong performance in the space.
In terms of standout stocks, Arista Networks surged 14.5%, breaking key resistance levels, and Meta Platforms saw a 4.9% increase, both signaling that seasoned investors should consider these stocks for their portfolios. DoorDash and Royal Caribbean also made notable moves, climbing past buy points, while Interactive Brokers managed to break through key areas, demonstrating significant positive trends.
As the stock market rally regains momentum, it’s crucial for investors to stay engaged with their portfolios and capitalize on these buoyant conditions. Keeping your watchlist updated with emerging stocks and flourishing sectors will be essential in navigating the financial landscape post-Fed meeting. The potential for profits remains strong, but vigilance is necessary as market sentiments can shift swiftly in response to economic news.
Stay informed and ready to act as we head into this pivotal week, ensuring that your investment strategy aligns with the shifting market dynamics and leading sectors.