Tag Archives: Wall Street

U.S. Stocks Retreat After Longest Weekly Rally

U.S. Stocks Retreat After Longest Weekly Rally: After U.S. stocks recorded their longest weekly rally of the year,
the markets saw a pullback as traders braced
for key earnings reports from major companies like Boeing, Tesla, and United Parcel Service.
This retreat comes at a time when markets are overbought, increasing the likelihood of short-term profit-taking.

 

Content

U.S. Stocks Retreat

Wall Street Earnings Challenges

Broad Decline Across Indices

Interest Rate Expectations

Market Volatility

Continued Gains

Future Market Outlook

Earnings Season and Big Tech Performance

Impact of Hurricane Helene

Market Reactions to Corporate Earnings

Strategic Expectations

 

 

 

 

U.S. Stocks Retreat After Longest Weekly Rally

U.S. stocks took a breather after consecutive gains, pushing the S&P 500 to record highs.
According to SentimenTrader, the market saw about 30 sessions without consecutive losses,
one of the best streaks since 1928.
Dan Wantrobski, research director at Janney Montgomery Scott,
noted that the market remains overbought and vulnerable to short-term profit-taking.

 

Wall Street Earnings Challenges

Approximately 20% of the companies in the S&P 500 are expected to release their earnings this week,
making this earnings season one of the biggest challenges for Wall Street.
According to Bloomberg Markets surveys, company results are more crucial
in determining the market’s direction compared to the upcoming U.S. elections or Federal Reserve policies.

 

Broad Decline Across Indices

The S&P 500 fell by 0.4%, the Nasdaq 100 dropped by 0.1%,
and the Dow Jones Industrial Average decreased by 0.9%.
The Russell 2000 also saw a decline of 1.5%.
Additionally, homebuilder stocks experienced significant losses,
while United Parcel Service shares fell after a sell recommendation from Barclays.
In contrast, Nvidia reached a new record, and Boeing shares rose by 2.7% after reaching a tentative agreement with its union.

 

Interest Rate Expectations and Rising Bond Yields

U.S. 10-year Treasury yields rose by 9 basis points to 4.18%.
Increasing expectations suggest the Federal Reserve may keep interest rates unchanged in November,
with a potential rate cut of 20 basis points expected next month.

 

Market Volatility and Geopolitical Risks:

Oil prices rose as China moved to support its economy while traders monitored geopolitical risks in the Middle East.
Volatility in stock options, bonds, and currencies increased as investors paid more
for hedging against risks related to U.S. elections,

interest rate decisions, and concerns about expanding conflicts in the Middle East.

 

Continued Gains for the S&P 500

The S&P 500 has posted continuous gains over the past six weeks,
a rare occurrence that has only happened 53 times since 1950, accounting for about 8% of all six-week periods,
according to Adam Turnquist of LPL Financial.

 

 

 

 

Future Market Outlook

Turnquist explained that the index typically posts an average return of 0.2% in the week following such streaks,
with 58% extending to seven weeks.
The average returns over the next six and twelve months were 5.1% and 11.4%,
respectively, with above-average favorable rates for both periods.
Turnquist added, “With the market entering a potentially volatile
period before the elections and facing resistance near peak price levels,
historical data suggests that investors should take advantage of market dips to buy,
as momentum tends to continue after a six-week winning streak.”

 

Earnings Season and Big Tech Performance

David Laut from Abound Financial said, “We believe there is room for continued stock gains,
especially as markets enter a seasonally strong period of the year,
with November and December historically being good months for stocks.”He added,
“Earnings season is heating up, and soon we’ll hear from big tech companies and the latest on their AI investments.
For these companies, this is the quarter to prove their profitability.”
Tesla is expected to face questions this week during its earnings call about production targets
and regulatory challenges following the disappointing launch of its new Cybercab truck.
Boeing also faces challenges as it works to calm investor concerns about production delays,
labor disputes, and depleting financial resources.

 

Impact of Hurricane Helene on U.S. Stocks

The earnings results of companies like UPS, Norfolk Southern,
and Southwest Airlines are expected to reveal the combined impact of Hurricane Helene
and the three-day East Coast dockworkers’ strike during the last quarter.

 

Market Reactions to Corporate Earnings

Jeffrey Buchbinder of LPL Financial noted that expectations for third-quarter earnings are relatively low,
with analysts forecasting only a 3% increase in earnings per share for S&P 500 companies.
Buchbinder added that this low bar and a supportive economic environment could lead to gains.
However, he cautioned that the market may have already priced in these positive results.
According to Morgan Stanley strategists, led by Michael Wilson,
companies beating earnings estimates this season are rewarded more significantly than the past four quarters.
They also noted that revisions for 2025 have outperformed seasonal expectations.
Bloomberg Intelligence strategists Gina Martin Adams and Wendy Soong added
that the early days of earnings season are seeing relatively strong price reactions.

 

Strategic Expectations

According to Goldman Sachs strategists, including David Kostin,
U.S. stocks are unlikely to maintain their exceptional performance from the past decade.
Many investors may shift to other assets like bonds to achieve better returns.
The strategists expect the S&P 500 to deliver an annual nominal total return of just 3% over the next ten years,
compared to 13% over the past decade, with a long-term average return of around 11%.
In a note dated October 18, the team wrote,
“Investors should be prepared for lower-than-average returns on equities over the next decade,
likely closer to the lower end of the typical performance range.”
 

U.S. Stocks Retreat After Longest Weekly Rally

Company Earnings Bets Push Wall Street to New Record Highs

Company Earnings Bets Push Wall Street to New Record Highs: U.S. stock indices have reached new record highs
as investors focus on corporate performance and remain optimistic about a potential “soft landing” for the U.S. economy.
Without significant economic data this week, Wall Street focuses on earnings reports to drive market sentiment.

 

 

Content

Stock Indices Reach Record Levels

Surpassing Expectations

Solid Gains for Major Companies

The Start of Earnings Season

Support for AI-Related Stocks

Economic Data Supports Cyclical Stocks

Preparing for a Potential Setback

Warning of a Future Setback

Bull Markets and Historical Shifts

Long-Term Bull Market Volatility

Weak Market Returns in the Third Year

 

 

 

 

Stock Indices Reach Record Levels

The S&P 500 index surged nearly 1%, marking its 46th record high.
Despite lower expectations for third-quarter earnings,
investors are betting on the potential for positive surprises during this earnings season.

 

Surpassing Expectations

Expectations indicate that companies in the S&P 500 may post their weakest results in the last four quarters,
with a year-on-year increase of only 4.3%.
However, corporate guidance suggesting a 16% increase indicates the potential for surpassing market expectations.

Kali Cox from Ritholtz Wealth Management noted that “Wall Street has underestimated American companies lately”
stressing that the most significant risk lies in missing out on the final gains and market recovery.

 

Solid Gains for Major Companies

The S&P 500 neared 5860 points amid low trading volumes.
The Nasdaq 100 climbed 0.8%, while the Dow Jones Industrial Average rose 0.5%.
Nvidia led the gains among major companies, with Apple benefiting from positive analyst calls,
while Tesla recovered after a dip last week.
Goldman Sachs and Citigroup shares also advanced in their earnings announcements.

While the dollar slightly strengthened, Bitcoin surged 5%.
In contrast, oil prices declined due to a lack of new incentives
from the Chinese Ministry of Finance to boost consumption in the world’s largest crude oil importer.

 

The Start of Earnings Season

Earnings season unofficially kicked off on Friday,
led by major financial firms like JPMorgan Chase and Wells Fargo.
Alongside other big banks set to report this week,
traders will closely watch results from key companies such as Netflix and J.B. Hunt Transport Services Inc.

Bank of America strategists said that in early third-quarter results last week,
U.S. companies benefited from lower interest rates at the start of the Federal Reserve’s easing cycle.

A Bank of America team led by Ohsung Kwon and Savita Subramanian noted that
easing interest rate pressures were evident in increased debt underwriting,
mortgage applications, and refinancing activity, alongside signs of stabilization in manufacturing.

 

 

 

Support for AI-Related Stocks

Solita Marcelli from UBS Global Wealth Management emphasized that third-quarter
results should confirm strong earnings growth for large-cap companies in a resilient economic backdrop.

Marcelli stated, “We maintain a positive outlook for U.S. equities,
supported by healthy economic growth, earnings expansion, and the Fed’s easing cycle, alongside the AI growth narrative.
” She added, “Although valuations are elevated, we believe they are justified given the favorable backdrop.”

Marcelli reiterated her price target for the S&P 500 at 6200 points by June 2025,
continuing to favor AI beneficiaries and high-quality stocks.

 

Economic Data Supports Cyclical Stocks

Mike Wilson from  Morgan Stanley   predicted that the improvement in U.S. macroeconomic data
would continue to support cyclical stocks tied to economic momentum.
Goldman Sachs strategists, led by Christian Mueller-Glissmann,
also noted that better U.S. data and supportive policies reduced near-term downside risks.

 

Preparing for a Potential Setback

Craig Johnson from Piper Sandler stated, “Last week, the S&P 500 surpassed our year-end price target of 5800 points,
and we are leaving it unchanged.
However, we recognize that some fine-tuning may be necessary,
as we expect stocks to continue their upward trajectory after the U.S. presidential election.”

 

Warning of a Future Setback

Despite solid gains in the first two years of this bull market,
Sam Stovall from CFRA cautioned investors to prepare for a potential setback in the next 12 months.
His analysis is based on historical data,

showing that the average return after 11 bull markets celebrating their second anniversary was just 2%
(5.2% excluding those that turned bearish before the end of the third year).

 

Bull Markets and Historical Shifts

Additionally, all past bull markets experienced a 5% decline,
with five enduring sell-offs exceeding 10% but less than 20%.
Three markets succumbed to new bear waves.
Despite these unsettling fluctuations, three bull markets posted double-digit gains.

 

Long-Term Bull Market Volatility

Bull markets that lasted this long tended to persist before finally facing a 20% decline.
However, according to Bespoke Investment Group, that doesn’t mean there were no hurdles along the way.

 

Weak Market Returns in the Third Year

According to Bespoke’s analysis, the S&P 500 saw weaker-than-average returns in the third year of bull markets.
On average, the index gained only 3.7% in the 12 months after the 503rd day of previous bull markets,
with positive returns in just 55%. By comparison, the average 12-month return for all markets was 9.26%.

Bespoke added that of the 11 bull markets analyzed, only two ended within the 12 months following day 503.
Thus, the period between the second and third year

of a long-term bull market has often been more of a consolidation phase than an endpoint.

 

 

Company Earnings Bets Push Wall Street to New Record Highs

Stock markets continue to rise Ahead of Key Inflation Report

Stock markets continue to rise Ahead of Key Inflation Report: As Wall Street gears to release crucial inflation data,
the stock market continues to soar, with the S&P 500 setting new all-time highs.
Traders eagerly await the Consumer Price Index (CPI) report to gauge the Federal Reserve’s next steps regarding interest rate cuts.
Meanwhile, other financial markets react with notable movements, including bonds and currencies.

 

Content
Stock Market Hits Record Levels
Technology Stocks

Federal Reserve’s Dovish Stance
Market Movements
Inflation Moderation

Investors’ Expectations

What’s Next for the Bull Market?

Bill Gross’ Forecast

Summary of Market Movements

 

 

 

 

 

Stock market continues to soar and Hits Record Levels

On the brink of the CPI report, the S&P 500 neared 5,800 points, marking its 44th record close in 2024.
Technology stocks again led the charge, with Apple shares climbing 1.7%.

Nvidia paused its five-day rally, while Tesla shares dipped slightly ahead of its highly anticipated Robotaxi launch.

Alphabet, Google’s parent company, dropped 1.5%
following news, the U.S. government is considering breaking up the tech giant in a landmark antitrust case.

 

Technology Stocks: Buying Opportunity Amid Volatility

Despite recent volatility in major tech stocks, experts see this as a buying opportunity.
Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management, stated,

“We remain positive on the tech sector, particularly with the outlook for artificial intelligence.

We believe volatility should be used to build long-term AI exposure.”

 

Federal Reserve’s Dovish Stance

The release of the Federal Reserve’s latest meeting minutes showed some internal debate over a half-point rate cut,
with some officials favoring a more minor reduction.
Despite this, markets remained largely unaffected.
David Russell from TradeStation remarked,
“The Fed minutes were uneventful, which could be a good sign for stock investors.
Policymakers agree inflation is fading, leaving rate cuts on the table if needed.”

 

 

 

Market Movements Ahead of CPI Report

As stocks surged, the S&P 500 rose by 0.7%, the Nasdaq 100 added 0.8%,
and the Dow Jones Industrial Average climbed by 1%.
In other markets, the U.S. dollar hit its longest winning streak in over two years,
rising 0.4%, U.S. 10-year Treasury yields increased by five basis points to 4.06%.

 

Inflation Moderation and Economic Outlook

The upcoming CPI report is expected to show a 0.1% increase in consumer prices for September,
the smallest gain in three months.
Over the past year, CPI likely rose by 2.3%, marking six consecutive months of slowing inflation.

Core inflation, which excludes food and energy,
is expected to increase by 0.2% for the month and 3.2% compared to September 2023.

Matthew Weller from Forex.com commented, “With the Fed shifting focus from inflation to the labor market,

tomorrow’s CPI report may cause less market movement than expected,

though volatility is still possible following the strong jobs report.”

 

Investors’ Expectations and Economic Optimism

A recent survey from 22V Research revealed mixed investor sentiment about the market’s reaction to the CPI report.
While 42% of investors expect a minimal or mixed response, 32% predict a risk-off approach,
and 25% anticipate a risk-on reaction.
Dennis DeBusschere, founder of 22V, noted growing optimism about inflation,

adding that fewer investors expect a recession,
though concerns about tightening financial conditions remain.

 

What’s Next for the Bull Market?

According to Ed Clissold of Ned Davis Research,

inflation must keep moderating for the stock market rally to continue,
the economy must land softly, and corporate earnings must stay robust.
As the bull market approaches its second anniversary,

broader market participation could fuel the next phase of stock gains,
particularly as large-cap and growth stocks outperform small-cap and value shares.

 

Bill Gross’ Forecast: Lower, But Positive Returns

Bill Gross is a billionaire investor and co-founder of Pacific Investment Management Co.
predicts that investors can still expect low but positive returns while the market rally is slowing.
He recommends maintaining average stock exposure, focusing on defensive stocks,
and holding a small bond position.

Gross said, “No bear market, but it’s not the same bull market anymore.”

 

Summary of Market Movements

Stocks: The S&P 500 rose 0.7%, the Nasdaq 100 added 0.8%,
and the Dow Jones Industrial Average climbed 1%. 

Currencies: The Bloomberg Dollar Spot Index gained 0.4%,
the euro fell 0.4% to $1.0939, and the Japanese yen weakened by 0.8% to 149.32 per dollar.
Cryptocurrencies: Bitcoin fell 2.2% to $60,966,
while Ether dropped 1.1% to $2,415. –
Commodities: West Texas Intermediate crude slipped 0.2% to $73.44 per barrel,
and spot gold declined 0.5% to $2,609.26 an ounce.  

 

 

Stock markets continue to rise Ahead of Key Inflation Report

Technology Stocks Weigh on Wall Street Indices

Technology Stocks Weigh on Wall Street Indices: The S&P 500 index fell by 1% after a four-week streak of gains,
as heavy selling in significant tech stocks dragged Wall Street indices down.
This decline was also driven by increasing geopolitical concerns

and speculation that the Federal Reserve might reduce the scale of interest rate cuts next month.

 

Content

S&P 500 Index

Impact of Geopolitical Tensions

Performance of Tech Stocks

Optimism in the Job Market and Economy

Start of Earnings Season

 

 

 

 

S&P 500 Index and Tech Stocks

The S&P 500 index dropped by 1% after a four-week rally.
Shares of Alphabet (Google’s parent company) fell by 2.4%
following a court ruling, developers can create competing marketplaces for the Google Play Store.
Additionally, Brent crude oil prices surged above $80 per barrel amid escalating tensions in the Middle East.
U.S. Treasury bonds continued to decline, with the 10-year bond yield rising to 4%.

 

Impact of Geopolitical Tensions

Chris Larkin from E*TRADE, a subsidiary of Morgan Stanley,

noted that Friday’s strong jobs report reduced the likelihood of a 50-basis-point interest rate cut in November.
It also increased the chances that the Federal Reserve might keep rates unchanged if economic data continues to outperform.
Dave Sekera from Morningstar warned that further geopolitical escalation
could encourage a shift toward safe-haven investments in value stocks at the expense of growth stocks,
suggesting that energy sectors may benefit in such scenarios.

 

Performance of Tech Stocks

On Monday, all major sectors in the S&P 500 fell, except for the energy sector.

The “Magnificent Seven” index—comprising Amazon, Tesla, Alphabet, Meta, Nvidia, Apple, and Microsoft—declined by 1.9%.
Amazon’s shares dropped by 3.1% after Wells Fargo downgraded its stock rating.
At the same time, Apple shares fell by 2.3% following a warning from
a Jefferies analyst said investors’ expectations for the new iPhone are overly optimistic.
In contrast, Nvidia bucked the trend, with its shares rising.

 

 

 

Optimism in the Job Market and Economy

Despite the stock decline, some strategists are more optimistic about the strength of the job market and the overall economy.
Michael Wilson from Morgan Stanley raised his outlook on cyclical stocks relative to safer defensive stocks,
citing robust economic data and expectations of more interest rate cuts from the Federal Reserve.

David Kostin from Goldman Sachs also raised his 12-month target for the S&P 500 to 6,300 points.

Meanwhile, BlackRock strategists reaffirmed their confidence in U.S. stocks, highlighting slowing inflation and lower interest rates.

 

 Start of Earnings Season

As the earnings season approaches, traders closely watch corporate performance beyond the macroeconomic picture.
Analysts expect the third-quarter earnings season to be a fruitful opportunity for investors who follow active money management strategies,
according to strategists at Bank of America.
In a memo on Monday, a team led by Ohsung Kwon stated that
“the options market expects the largest implied move in individual stocks after earnings since 2021,

while volatility in the S&P 500 remains low.”
They added that the upcoming earnings season will provide a prime environment for stock pickers.

Financial sector earnings will kick off on Friday,

with reports from JPMorgan Chase, Wells Fargo, and BlackRock.
According to Bloomberg Intelligence, net interest income and capital market revenues

will be critical areas of focus after the Federal Reserve’s rate cut in September.

In the airline sector, Delta Air Lines—the first major U.S. airline to report its results this quarter
—is expected to provide insight into travel demand following reports from Airbnb

and Booking Holdings, which indicated a decline in holiday spending.

 

 

Technology Stocks Weigh on Wall Street Indices

Strong Economic Data Lowers Wall Street’s Rate Cut Expectations

Strong Economic Data Lowers Wall Street’s Rate Cut Expectations: Robust job numbers have caused a decline
in Wall Street’s confidence that the Federal Reserve’s next interest rate cut will be significant.
U.S. companies added more jobs than expected in September, prompting varied market reactions.

Contents

Bond Yields

Job Numbers

Expert Commentary

Rate Cut Options

Differing Views

Geopolitical Tensions

Uncertainty Concerns

Stock Market Outlook

Corporate News

Asian Markets

 

 

 

 

Rising Bond Yields and Steady Stocks 

Yields on 10-year Treasury bonds rose to 3.8%, up from 3.69% in the previous session.
Meanwhile, the S&P 500 index remained steady, while the Nasdaq 100 index gained 0.1%.
This performance followed a rise in the U.S. dollar driven by stronger-than-expected job figures.

 

Surprise Job Numbers

Data released on Wednesday showed that U.S. companies added more jobs than expected last month,
contradicting other indicators suggesting a slowdown in the labor market.
Investors are now awaiting Friday’s nonfarm payroll report to assess the health of the U.S. economy.

 

Expert Commentary 

Chris Larkin of E*Trade noted that the ADP job report exceeded expectations,
indicating that while the labor market is slowing, it is not collapsing.
He added that Friday’s report will be crucial in shaping near-term market sentiment.

 

Rate Cut Options  

Bank of America strategists, led by Meghan Swiber, believe that a half-point rate cut is still an option,
even with a strong labor market.
On the other hand, Marc Rowan, CEO of Apollo Global Management,
warned that the Federal Reserve’s aggressive monetary easing could overstimulate the economy,
especially with rising real estate prices.

 

 

 

 

 

Diverging Views

Richmond Federal Reserve President Thomas Barkin took a different view,

stating that it is too early to declare victory over inflation,
emphasizing the ongoing uncertainties regarding inflation and employment.

 

Geopolitical Tensions and Market Impact

Regarding tensions in the Middle East, investors are hopeful that the situation will de-escalate,
as it did in April, despite Israel’s vow to retaliate against missile attacks from Iran.
Meanwhile, early gains in oil were erased due to an unexpected rise in U.S. inventories,
with West Texas Intermediate crude trading at around $71 per barrel.

 

Uncertainty Concerns

Anna Rosenberg of Amundi Asset Management highlighted the significant uncertainty
in the markets but added that expectations remain that the tensions will not escalate into a full-scale war.

 

Stock Market Outlook

For stock investors, keeping oil prices below $100 per barrel
and maintaining solid corporate earnings are critical drivers of stock market growth.
Mary Ann Bartels of Sanctuary Wealth expects the S&P 500 to reach 6,000 points
by year-end if interest rates decline and consumer spending remains strong.

 

Corporate News

In corporate news, Humana’s shares dropped after a decline in Medicare quality ratings,

while Nike’s stock also fell after the company withdrew its full-year sales guidance.

Tesla’s shares declined by 3.5% following disappointing quarterly vehicle sales.

 

Asian Markets  

Chinese stocks listed in Hong Kong saw their largest rise in nearly two years
after Beijing eased home purchase regulations.
This was part of a massive stimulus effort announced last week by Chinese leaders,
which boosted local and international markets.

 

 

Strong Economic Data Lowers Wall Street’s Rate Cut Expectations

Fed Bets Push Wall Street Towards Small Stocks

Fed Bets Push Wall Street Towards Small Stocks: As bets on a half-point rate cut by the U.S. Federal Reserve increase,
investors are shifting their investments towards economically sensitive sectors, moving away from traditionally safe areas.
Experts from Morgan Stanley, Goldman Sachs, and JPMorgan
 noted that the impact of the rate cut size is less significant on stocks than the overall state of the U.S. economy.
This trend has been reflected in the financial markets,
with U.S. 10-year Treasury yields dropping by three points,
the dollar reaching its lowest level since January, and gold prices soaring to record highs.
This reflects growing investor anxiety and seeking safer assets amid potential market volatility.

 

Content
Increasing Bets
S&P 500 Performance

Impact of the U.S. Economy

Divergence of Indices and Stocks

Impact of the Bond and Currency Markets

Performance of Tech Companies

Tech Stocks Regaining Momentum

Return of Hedge Funds

Stock Strategies

Investor Recommendations

Conclusion

 

 

 

 

Fed Bets Push Wall Street Towards Small Stocks

The increasing bets on a half-point rate cut by the Fed have driven investors toward economically sensitive sectors,
moving away from extensive tech stocks considered safe havens.
Apple shares fell by 3% after warnings that the demand for the iPhone 16 Pro was below expectations.
Despite no significant changes in the S&P 500 on Monday, most listed stocks saw gains, reflecting a shift of funds into non-tech stocks.

 

S&P 500 Performance and Tech Stock Decline

This divergence is mainly due to the weak performance of major tech companies that dominate the main U.S. stock index.
Meanwhile, the equal-weighted measure within the S&P 500—
which gives companies like Target and Microsoft equal impact—has approached its all-time highs,
indicating a broader stock recovery this year.
John Stoltzfus from Oppenheimer Asset Management expects these shifts
to reflect minor market corrections after the significant volatility in the S&P 500.

 

U.S. Economy’s Impact on Stocks More Significant Than Rate Cut Size

With the Fed’s decision approaching, strategists from Morgan Stanley, Goldman Sachs,
and JPMorgan emphasized that the state of the U.S. economy is more critical to stocks than the rate cut size.
Kali Cox from Ritholtz Wealth Management predicted that the impact
of a rate cut would be minimal compared to the path of future reductions over the next year.

 

Divergence in Indices and Stocks

The S&P 500 remained stable at around 5625 points,
while the Nasdaq 100 fell by 0.6% and the Dow Jones Industrial Average rose by 0.4%.
The Bloomberg Magnificent Seven index declined by 1%,
while the Russell 2000, which includes smaller companies, increased by 0.6%.
This performance highlights the divergence between large and small stocks,
with bank stocks significantly outperforming the broader market,
buoyed by positive analyses of smooth economic landing prospects.

 

 

 

 

Impact of Bond and Currency Markets

U.S. 10-year Treasury yields fell by three basis points to 3.62%,
reflecting declining confidence in the long-term economy.
The dollar dropped to its lowest level since January, and gold prices reached record highs,
signaling a growing demand for safe-haven assets amid market volatility expectations.

 

Performance of Tech Companies and Their Market Influence

Giant tech companies like Nvidia and Microsoft have been significant
drivers of stock gains over the past two years due to their strong earnings and investments in AI technologies.
However, since the S&P 500 peaked in July,
the Magnificent Seven stocks have declined by over 6%,
while other sectors have started to gain momentum.

 

Tech Stocks Regaining Their Position

Paul Nolte from Murphy & Sylvest Wealth Management explains that
the winning stocks since July have been those outside the major tech sector,
yet technology is gradually regaining its market leadership.”
This recovery reflects a temporary reduction in tech exposure,
prompting investors to explore other sectors offering more significant opportunities.

 

Hedge Funds’ Return and Market Trends

According to a recent Morgan Stanley Prime Brokerage report,
hedge funds have resumed buying large tech stocks,

while defensive sectors like real estate and healthcare have experienced net sales.
This shift indicates investors’ readiness for a rate-cutting cycle and their bets on market recovery.

 

Stock and Bond Strategies and Divergent Expectations

According to Lisa Shalett of Morgan Stanley Wealth Management,
the markets show differing views on the future,
with stocks pricing in a smooth landing while bonds signal a potential recession.
If bonds are on the correct path, stocks may decline due to falling profits;
if bonds are wrong, rising interest rates could create headwinds for valuations.

 

Investor Recommendations Amid Market Tension

Goldman Sachs strategists, led by David Kostin, recommend caution,
noting that stock valuations remain limited at current levels, with economic growth as the main driver.
JPMorgan advised focusing on defensive sectors, expecting small companies to benefit from declining bond yields.

 

Conclusion

Amid market tensions driven by elections, the economy, and potential rate cuts,
markets remain cautious and on edge.
Savita Subramanian from Bank of America advised focusing on stocks with safe dividends,
emphasizing that sometimes the safest options are the best, even if they seem unexciting.

 

 

Fed Bets Push Wall Street Towards Small Stocks

Stock Market Rotation Surges on Fed Rate Cut Hopes

Stock Market Rotation Surges on Fed Rate Cut Hopes: Wall Street is buzzing with renewed anticipation of an aggressive rate cut by the Federal Reserve,
with traders betting on a potential half-point reduction this month.
optimism is fueling a shift away from tech mega caps toward stocks
that would benefit the most from easier monetary policy,
driving U.S. stock indexes to their best performance of 2024.

Content

Wall Street
Small Caps Outperform

Growing Confidence

Shift in Expectations

Stock Market Performance

Treasury Yields

Analysts’ Insights

Small Caps Rally

Underlying Market Changes

Risks of Misinterpreted Rotation

Market Outlook
Conclusion

 

 

 

 

Wall Street Bets on Big Fed Rate Cut

Wall Street traders have revived expectations for a half-point rate cut by the Federal Reserve,
propelling stocks to their best week of the year.
The market is shifting towards economically sensitive companies,
particularly smaller firms, which would benefit the most from policy easing.

 

Small Caps Outperform Amid Rotation

Economically sensitive shares outperformed the tech megacaps that have led the bull market,
with the Russell 2000 index of smaller firms climbing 2.5%.
An equal-weighted version of the S&P 500, which balances tech giants like Nvidia Corp.
equally with companies like Dollar Tree Inc.
also outpaced the broader U.S. equity benchmark, signaling a potential broadening of the rally.

 

Confidence Grows as Investors Look Beyond Big Tech

As the S&P 500 continued to set records in the first half of the year,
some investors worried that the gains were concentrated among a few big names.
Now, sectors outside of big tech are gaining momentum
as investors grow more confident that the anticipated start
of the Fed’s rate cut cycle will further support broader corporate America.

 

The Shift in Fed Rate Cut Expectations

“The biggest news in the last 24 hours has been the shift
in odds for a 50 basis-point cut at next week’s Fed meeting,” said Jonathan Krinsky at BTIG.
He added that small caps present a better risk/reward scenario in the near term,
suggesting that while tech giants may pause,
they will likely still participate if the S&P 500 continues to climb.

 

Stock Market Performance Highlights

The S&P 500 rose 0.5% for the fifth consecutive day,
while its equal-weighted version gained 1%.
The Dow Jones Industrial Average advanced 0.7%,
and the Nasdaq 100 added 0.5%. A gauge of the “Magnificent Seven” megacaps also advanced, albeit modestly.

 

 

Treasury Yields and Market Reactions

Treasury yields for two-year notes fell five basis points to 3.59%,
while the likelihood of a 50-basis-point rate cut jumped to 40%,
up from just 4% earlier in the week.
The dollar weakened, and gold prices hit another record high.

 

Analysts Weigh in on Fed’s Next Move

Neil Dutta at Renaissance Macro Research argued
that the case for a more aggressive Fed cut next week is strong,
dismissing concerns that such a move would signal insider knowledge at the Fed.
Michael Feroli at JPMorgan echoed this sentiment,
sticking to his prediction that the Fed will make the “right call” and cut rates by half a point.


Small Caps Set to Rally on Rate Cuts  

Eric Johnston at Cantor Fitzgerald noted that if the Fed opts for a significant rate cut,
small caps would experience a substantial rally.
Even a less aggressive 25-basis-point cut could still provide a boost,
given the sector’s sensitivity to interest rate changes.

 

The Rotation Underneath the Market

While there has been a broader shift away from tech and communications stocks
towards more defensive sectors,
the challenge remains that earnings growth among
the largest companies is expected to outpace the rest of the index.
Ryan Grabinski at Strategas cautioned that this
could lead investors back to big names if growth becomes scarce.

 

Risks of Misinterpreted Rotation

Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management,
warned that the current rotation might not be as broad as it seems.
Many investors are adding AI-focused stocks from different sectors,
mistakenly believing they are diversifying,
while still heavily exposed to technology themes.

 

Market Outlook Hinges on Employment Data

According to strategists at Bank of America,
led by Michael Hartnett, stock markets are likely to trade sideways
until U.S. employment data shows clear signs of either weakening or strengthening.
This would help clarify the market direction,
which has been characterized by rotation rather than significant moves up or down.

 

Conclusion

As Wall Street gears up for the Fed’s next move,
the potential for a more aggressive rate cut has revived hopes of a broader rally in stocks.
While smaller companies stand to gain the most,
the overall market remains in flux, waiting for clearer economic signals.
Investors are closely watching the Fed,
weighing the implications of rate cuts on their portfolios and the broader market landscape.

 

 

Stock Market Rotation Surges on Fed Rate Cut Hopes

U.S. Stocks Register Their Steepest Weekly Decline Since March

U.S. Stocks Register Their Steepest Weekly Decline Since March: Renewed fears of an economic slowdown and the Federal Reserve’s slow
response resurfaced after the August jobs report, pushing markets into negative territory.
Stocks posted substantial declines, marking their weakest weekly performance since March 2023.
Bonds also fell, driven by disappointing labor market data,
heightening investor anxiety about the economic outlook.

 

Contents

Decline in U.S. Stock Indices

Federal Reserve Rate Expectations

Labor Market Data and Reactions

Decline in Stocks and Key Sectors

The Fed’s Cautious Approach

How Does Wall Street View the Jobs Report

 

 

 

Decline in U.S. Stock Indices

The S&P 500 index dropped by 1.7%, while the Nasdaq 100 fell by 2.7%,
as data showed job growth was 23,000 jobs short of expectations in August.
Yields on two-year Treasury bonds decreased by up to 15 basis points before slightly recovering.

 

Federal Reserve Rate Expectations

Meanwhile, Wall Street’s bets on a 50 basis point Fed rate cut weakened
after Federal Reserve Governor Christopher Waller stated he was “open” to a larger reduction.
Scott Wren of Wells Fargo Investment Institute noted
that markets are now focusing on how accommodative
the Fed will be with its monetary policy and the speed of the economic slowdown,
expecting short-term volatility.

 

Labor Market Data and Reactions

Non-farm payrolls increased by 142,000 jobs in August,
the lowest three-month average since mid-2020.
The unemployment rate fell to 4.2% for the first time in five months,
reflecting the impact of temporary layoffs.
Stephen Blitz of TS Lombard indicated that the economy is nearing a critical turning point,
and upcoming Fed decisions on rate cuts will be crucial.

 

 

 

Decline in Stocks and Key Sectors

All major groups in the S&P 500 fell,
with significant companies like Nvidia dropping 4.1%
and Broadcom declined by 10% due to disappointing forecasts.
The Dow Jones Industrial Average fell by 1%,
and the Russell 2000 index of small-cap companies dropped by 1.9%.
Wall Street’s fear gauge, the VIX, rose to 22 points,
while 10-year Treasury yields stabilized at 3.72%.

 

The Fed’s Cautious Approach

Traders expect a rate cut of about 25 basis points in September,
with slim chances of a larger cut.
Krishna Guha of Evercore suggests that the Fed leans toward a gradual cut in September,
with the potential for accelerated reductions in November if employment risks increase.

 

How Does Wall Street View the Jobs Report?

David Donabedian of CIBC Private Wealth believes
the report highlights the risks of a soft landing without entering a recession,
with markets continuing to look for signs of the slowdown’s extent.

 Seema Shah of Principal Asset Management states that the Fed’s
decision will hinge on balancing inflation and recession risks,
favoring a cautious 25 basis point cut.

 Andrew Brenner of NatAlliance Securities considers
the report gives the Fed room to move in any direction
but believes the Fed is currently lagging behind the market’s pace.

In conclusion, expectations are growing for the Fed to begin a cycle of monetary easing,
but the size and pace of action remain uncertain,
reflecting significant challenges facing policymakers during
this sensitive phase of the economic cycle.

 

U.S. Stocks Register Their Steepest Weekly Decline Since March 2023

Is September Really a Nightmare Month for Wall Street?

Is September Really a Nightmare Month for Wall Street?

Financial markets began Tuesday with a sense of anxiety and tension, as stocks declined at the start of what is historically considered the worst month on Wall Street.
This phenomenon is known as the “September Effect,” a term that refers to the weak performance of the stock market during this specific month. According to Ryan Detrick, Chief Market Strategist at Carson Group, September has been the worst-performing month over the past 10, 20 years, and even since 1950. According to Fisher Investments, September is the only month to record an average negative return since 1925 (-0.78%).

 

Content:

 

 

 

 

 

What Are the Reasons Behind the September Effect

There are several theories to explain this historical pattern.
The first theory suggests that traders returning from summer vacations reorganize their investment portfolios in September,
leading to increased selling volume, which puts pressure on stock prices.
Another theory points to the rise in bond offerings in September after the holidays,
attracting funds that would have otherwise been directed towards stocks.
Another theory blames mutual funds, whose fiscal year ends on October 31, for closing their losing positions for tax purposes.

However, there is no definitive explanation behind this phenomenon.
Although trading activity tends to decrease during holiday periods,
modern technology such as algorithmic trading and smartphones has reduced the impact of holidays on the markets.

 

 

A Few Bad Months Taint September’s Reputation

September’s bad reputation may be the result of a few exceptionally poor years.
In September 1931, during the height of the Great Depression, the S&P 500 lost about 29.6% of its value, marking its worst month ever. In September 2008, the index dropped by around 9% due to the collapse of Lehman Brothers.

Despite this, there are still reasons to stay in the market during September. Over the past century, stocks have risen slightly more than they have fallen in this month (51% up versus 49% down), meaning that avoiding the market during September doesn’t necessarily guarantee success. In fact, the average return for September over 98 years was exactly 0%, according to Fisher Investments.

 

 

 

 

 

 

 

The September Effect in Election Years

This year, concerns about September are heightened due to the upcoming presidential election.
Uncertainty surrounding the election results could weigh on stock performance over the next two months.
However, presidential elections haven’t made September a worse month for stocks.
In fact, stocks have risen in nearly two-thirds of September months preceding presidential elections (62.5% of cases since 1925), with an average return of 0.3%.

 

 

What Awaits the Markets This Month

Despite the well-known September effect, markets respond daily to current economic conditions and investor expectations.
This month, factors such as labor market movements, inflation,
and upcoming Federal Reserve actions may play a more influential role than historical patterns alone.

 

 

 

 

Wall Street Recovers as Powell Confirms Interest Rate Cut in September

Wall Street Recovers as Powell Confirms Interest Rate Cut in September: As anticipation builds around the Federal Reserve’s monetary policy decisions,
Jerome Powell, the Fed’s Chairman, has confirmed the central bank’s inclination to cut interest rates in September.
These statements have ignited the financial markets, with U.S. stock indices rising significantly while bond yields have dropped sharply.
In this report, we examine the impact of Powell’s statements on the markets and experts’ expectations for future monetary policy.

 

Content

Wall Street Recovery  

Powell’s Message  

Expert Reactions  

Risks of Large Rate Cuts  

Impact of September Jobs Data  

Pace of Rate Cuts  

Federal Reserve’s Actions  

Possibility of Strong Rate Cuts  

Rate Cut Expectations According to Experts 
Importance of September Jobs Data

 

 

 

 

Wall Street Recovers as Rate Cut Expectations

U.S. stock indices rose across all categories, and bond yields fell after Jerome Powell
gave the most unambiguous indication yet that the Federal Reserve will begin cutting interest rates in September.
While Wall Street had already anticipated the start of monetary easing next month,
Powell’s remarks that “the time has come” confirmed these expectations.
Additionally, many other aspects of his Jackson Hole speech should not be overlooked.
For instance, the Fed Chairman acknowledged recent progress in fighting inflation.
He also noted that the economy is growing “at a strong pace,” providing reassurance after recent concerns about growth.

 

Powell’s Message and Its Impact on Markets

However, Powell’s focus on the “calm labor market” captured the attention of many market observers.
This was largely seen as a signal that the Federal Reserve would

do whatever it took to avoid a noticeable slowdown.

 

Expert Reactions to Powell’s Speech

Chris Zaccarelli of the Independent Advisor Alliance said,
“The market should be pleased with this speech because it was not hawkish in any way.
It gave the green light for a 25 basis point rate cut
while leaving the door open for larger cuts if necessary.”  

Certainly, larger rate cuts could also be a warning sign for stocks,
as they might indicate a rush to prevent an economic downturn.

 

Risks of Large Rate Cuts

Zaccarelli noted, “It is important at this time to take a balanced approach to investing,
not planning for an imminent recession, chasing risks,
and not becoming complacent just because the Federal Reserve will cut rates in less than a month.”  

Meanwhile, Richard Clarida of Pacific Investment Management pointed out
Powell’s speech did not address any specific discussion about the terminal federal funds
rate at the end of this monetary easing cycle or the pace of rate cuts in the coming period.

 

Impact of September Jobs Data

Clarida, who is also a former Vice Chairman of the Federal Reserve, said,
“The details are yet to be focused on, but for the Federal Reserve, the direction seems clear.”
He added that the August jobs report
will likely determine whether the Fed will opt for a 25—or 50-basis-point cut.  

The S&P 500 index rose by over 1%, with all major sectors advancing.
Treasury bond prices rose across all maturities, and the two-year bond yield fell below 4%.
The dollar lost 1% of its value.
Swap traders now expect a total rate cut of more than 100 basis points this year,
implying a cut at each remaining monetary policy meeting until December,
including a significant 50 basis point cut.

 

 

 

 

Pace of Rate Cuts

David Russell of TradeStation said, “This was a significant event.
Jerome Powell today came with a series of hints leaning toward monetary easing.
He clarified this point with a clear call to adjust monetary policy.
This keeps market-supportive conditions in place until the end of the year,
making it difficult to expect a retest of this month’s lows.”

 

Possibility of Rapid Federal Reserve Action

Krishna Guha of Evercore believes that while Powell did not explicitly mention the “magnitude” of the cuts,
the “pace” suggests the possibility of moving faster than 25 basis points per meeting.  

Seema Shah of Principal Asset Management said,
“Powell has rung the bell to start the monetary easing cycle,”
adding, “Powell has not pre-committed to a 50 basis point cut, but make no mistake,
if the labor market shows further signs of slowing,
the Federal Reserve will cut rates with conviction.”

 

Possibility of Strong Rate Cuts

Neil Dutta of Renaissance Macro Research pointed out that Powell’s speech lacked the word “gradual.”
He noted that, unlike other Federal Reserve speakers,
Powell did not rule out the possibility of a strong rate cut during the policy reset.
Dutta added, “Powell’s legendary status is rising now” (referring to the

Fed Chair’s inclination to cut rates to avoid plunging the economy into a recession).

 

Rate Cut Expectations According to Experts’ Surveys

Bloomberg’s latest monthly survey of economists finds

that a more significant labor market downturn than previously

thought would prompt the Federal Reserve to cut interest rates faster and more aggressively.  

This would reduce the federal funds rate by 75 basis
points by the end of this year from its current level
compared to the July survey, which anticipated a 50 basis point cut
followed by a faster pace of cuts through 2026.

 

Importance of September Jobs Data

While many focused on Powell’s speech at the Jackson Hole Symposium,
Michael Wilson of Morgan Stanley believes that early September jobs data will be of greater importance.  

Wilson, the bank’s Chief U.S. Equity Strategist, said in an interview with Bloomberg TV,
“It’s about the job data.
That’s what will determine what the Federal Reserve does. They’ve said that.
And that’s what the market will focus on.”

 

 

Wall Street Recovers as Powell Confirms Interest Rate Cut in September