Wall Street Hits Record Highs on Rate Cut Expectations Amid AI Hype and Strong Earnings Forecasts

On Monday evening, US stock index futures rose on increased expectations for a September rate cut, leading Wall Street to record highs. The S&P 500 and Nasdaq extended gains, supported by strong technology and chipmaking stocks amid AI hype while the Dow fell. Analysts predict a 10.1% rise in S&P 500 companies' aggregate earnings per share for Q2, up from an 8.2% increase in Q1.

Paramount Global fell 5.3% after merging with Skydance Media, and Boeing gained 0.55% after resolving a fraud investigation related to 737 MAX crashes. Corning Inc. raised its Q2 core sales forecast and saw its shares rise 12% to a 52-week high.

Morgan Stanley's analysts advise traders to brace for a potential stock market correction due to uncertainties around the US presidential campaign, corporate earnings, and Federal Reserve policy. They predict a 10% correction is likely before the election and expects a volatile third quarter. They also note that the S&P 500 has increased by 17% this year, driven by anticipated rate cuts and AI enthusiasm, but sees limited upside potential through year-end. They recommend focusing on high-quality growth stocks.

UBS strategists forecast a 7.4% growth in S&P 500 earnings per share for Q2, with potential growth up to 11%. Non-TECH+ companies are expected to see lower growth compared to TECH+ companies.

Meanwhile, the second-quarter earnings season begins with reports from major banks like JPMorgan, Wells Fargo, and Citigroup on Friday. Other companies like PepsiCo and Delta Air Lines will also release earnings.

Key events this week include Fed Chair Jerome Powell's testimony before the Senate and House, the NATO summit in Washington, and the release of China's and the US's CPI data for June.

Data for Technical Analysis (1H) CFD US30 DJIA

Resistance : 39388.2, 39392.8, 39400.2

Support : 39373.4, 39368.8, 39361.4                             

1H Outlook

Source: TradingView              

Buy/Long 1 If the support at the price range 39353.4 - 39373.4 is touched, but the support at 39373.4 cannot be broken, the TP may be set around 39388.2 and the SL around 39343.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 39388.2 - 39408.2, TP may be set around 39437.0 and SL around 39363.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 39388.2 - 39408.2 is touched, but the resistance at 39388.2 cannot be broken, the TP may be set around 39368.6 and the SL around 39418.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 39353.4 - 39373.4, TP may be set around 39331.0 and SL around 39398.0, or up to the risk appetite.       

Pivot Points Jul 9, 2024 02:36AM GMT

Sources: Investing 1, Investing 2