U.S. Stocks Rise Amid Optimism, Focus on Fed Signals at Jackson Hole

Global stocks rose and the dollar declined on Monday, following a surge in shares last week driven by expectations that the U.S. economy would avoid a recession, and cooling inflation might lead to interest rate cuts.

U.S. stocks continued to advance on Monday, building on the year's largest weekly gains, as attention turned to the upcoming Jackson Hole Symposium and the Democratic National Convention for further economic signals. Although U.S. stock futures showed slight losses during Monday’s intraday trade, this was viewed as a consolidation after the strong gains of the previous week, reflecting growing optimism about the strength of the U.S. economy, with investors buying into major technology stocks following a recent sell-off.

The tech-heavy Nasdaq led the major U.S. stock indexes to a higher close, supported by gains in Nvidia, Microsoft, and Alphabet. Both the S&P 500 and Nasdaq extended their winning streaks to eight consecutive sessions, marking their longest streaks in 2024, as equities rebounded from a significant sell-off two weeks prior. Recent data showing consumer resilience despite economic softening boosted expectations that the Federal Reserve might lower interest rates by 25 basis points at its September meeting.

Meanwhile, all 11 sectors of the S&P 500 ended higher, with communication services seeing the largest percentage gain. Advanced Micro Devices' stock rose over 4% after announcing plans to acquire ZT Systems for $4.9 billion to expand its AI chip portfolio. HP Inc. fell over 3% after a downgrade from Morgan Stanley due to concerns about slowing demand. B. Riley Financial saw a 5.8% drop, extending last week's significant losses following issues with its investment in Vitamin Shoppe-owner Franchise Group.

This week, the earnings season continues with results expected from companies like Target, Lowe's, and Palo Alto Networks. Investors are also awaiting the Federal Reserve’s minutes on Wednesday and Jerome Powell’s speech at the Jackson Hole Symposium on Friday. His remarks will be closely analyzed for indications on the Fed's shift from restrictive to neutral monetary policy. There is speculation that Powell may signal a 25 basis point interest rate cut in September due to cooling inflation, with the possibility of a larger 50 basis point cut.

The Democratic National Convention, starting Monday, is also in focus, especially as market volatility is heightened. Investors are optimistic about the U.S. economy’s resilience, with Goldman Sachs reducing the likelihood of a recession in the next 12 months from 25% to 20%, citing positive economic data, such as lower jobless claims and stronger retail sales.

Despite investor caution, as highlighted by a Bank of America survey showing increased cash holdings and declining optimism in stocks, there remains confidence in a "soft landing" for the economy. While some expect the Fed to cut rates more aggressively to prevent a recession, others believe that steady growth will support the stock market, even without significant rate cuts. Bank of America analysts suggest that equities can continue to rise if economic growth remains stable, emphasizing the importance of growth over inflation concerns in driving market momentum.

Data for Technical Analysis (1H) CFD US30 DJIA

Resistance : 40906.3, 40911.9, 40921.1

Support : 40887.9, 40882.3, 40873.1                          

1H Outlook

Source: TradingView                 

Buy/Long 1 If the support at the price range 40867.9 - 40887.9 is touched, but the support at 40887.9 cannot be broken, the TP may be set around 40913.1 and the SL around 40858.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 40906.3 - 40926.3, TP may be set around 40938.0 and SL around 40878.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 40906.3 - 40926.3 is touched, but the resistance at 40906.3 cannot be broken, the TP may be set around 40887.9 and the SL around 40936.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 40867.9 - 40887.9, TP may be set around 40859.0 and SL around 40916.0, or up to the risk appetite.       

Pivot Points Aug 20, 2024 03:03AM GMT

Sources: Investing 1, Investing 2