Nasdaq Index, Dow Jones, S&P 500 News: Stocks Rally Amid Fed Rate Cut Expectations

Highlights

• Modest rise in U.S. stock futures early Tuesday
• Growing investor optimism about potential Fed rate cuts
• Major indexes show significant gains as year-end approaches

Market Watch: U.S. Stocks and Fed Expectations

U.S. stock futures are experiencing a modest rise early Tuesday.  At 11:17 GMT, the benchmark S&P 500 is trading 4796.75, up 3.75 or +0.8%. The tech-weighted Nasdaq Composite is at 16947.25, up 7.50 or +0.04% and the blue chip Dow Jones is trading 37696.00, up 18.00 or +0.05%. This movement reflects investors’ anticipation of potential Federal Reserve interest rate cuts in 2024, a scenario influenced by recent economic data trends.

Fed’s Rate Cut Prospects and Market Response

Investor optimism is growing about the likelihood of rate cuts by the Federal Reserve in the coming year. However, Federal Reserve officials, including Chicago Fed President Austan Goolsbee and Cleveland Fed President Loretta Mester, have cautioned against premature expectations. Despite this, market sentiment remains inclined towards a softening of monetary policy, as indicated by the 63.4% probability of a rate cut in March, as per CME’s FedWatch tool.

Stock Market Performance Overview

As 2023 approaches its end, significant gains are observed in major stock indexes. The Dow Jones Industrial Average has seen a rise of 3.8% in December, hitting new highs, while the S&P 500 and Nasdaq Composite have also shown remarkable uptrends, with the S&P 500 just shy of its all-time closing high and Nasdaq on track for its best yearly performance since 2020.

Economic Data and Future Outlook

Investors are now focusing on upcoming economic data, including the Commerce Department’s final Q3 GDP report and the PCE report due later this week. These reports are critical in shaping the market’s future trajectory, as they provide insights into income growth, consumer spending, and inflation trends.

Short-Term Forecast

Given the current market trends and upcoming economic data, the short-term outlook for U.S. stocks appears cautiously optimistic. The market’s reaction to the forthcoming economic reports will be pivotal in determining the direction for the end of the year and into 2024.

Technical Analysis

The E-mini S&P 500 Index, currently trading at 4796.50, is positioned above both its 200-day and 50-day moving averages, at 4445.20 and 4511.48 respectively. This positioning suggests a bullish trend in the medium to long term.

The index is also trading above the main support level of 4494.00 and minor support at 4562.50, reinforcing its upward momentum. Without specific resistance levels to gauge against, the index’s current price indicates strong bullish sentiment, as it maintains a consistent position above key moving averages and support levels.

The market sentiment, given these technical indicators, leans towards bullishness, suggesting potential for further upside in the near term.