Dow Hits 43,000 Amid Fed, Election Uncertainty

On Monday, U.S. stocks rose as investors anticipated more third-quarter earnings reports and awaited comments from Federal Reserve officials on monetary policy. Technology shares led the rally, pushing the Nasdaq higher and helping the S&P 500 and Dow reach record levels despite lighter trading volumes due to the Columbus Day holiday. Market momentum, spurred by strong bank earnings on Friday, drove the Dow above 43,000 for the first time.

Technology stocks, particularly semiconductor firms like NVIDIA and Arm Holdings, posted strong gains, with an index of semiconductor companies reaching a two-month high. However, the Dow's rise was capped by declines in Caterpillar and Boeing, due to a brokerage downgrade and projected losses, respectively.

Investor sentiment is shifting toward a "no landing" scenario in the U.S. economy, driven by strong job numbers and high inflation, with Bank of America strategists seeing potential for continued stock gains if inflation stays in check and consumer spending meets expectations. Cyclical stocks, benefiting from an upswing in earnings growth, could outpace defensive stocks if the Federal Reserve cuts rates further. Although Bank of America previously identified downside risks, stronger-than-expected data in September has balanced the economic outlook, with a "soft landing" still deemed the most probable scenario.

Meanwhile, U.S. market volatility is rising ahead of the election, with the VIX index trending higher. Evercore strategists note heightened investor anxiety as Vice President Harris and former President Trump remain locked in a close race. Similar to past election cycles, market uncertainty is amplified by the possibility of a delayed or contested result, potentially sparking volatility. Analysts suggest positioning in high-beta sectors like tech, biotech, and small-cap stocks to capture potential gains while balancing with defensive plays.

On the investment front, Deutsche Bank reports steady equity inflows and strong buyback activity, with inflows into U.S. and Chinese equities remaining robust, contrasting with outflows from Japanese and European markets. Technology and financials saw notable inflows, boosted by ongoing interest in Chinese tech stocks. As earnings season progresses, buyback activity is expected to increase, adding support to stock prices.

UBS analysts maintain a constructive view on U.S. equities, citing stable economic conditions, easing inflation pressures, and profit growth. AI investment remains a focal point, with profit gains expected beyond tech giants, despite some concerns over high valuations. UBS predicts 5-7% earnings growth for the S&P 500 in Q3 and sees broad support for stock prices through 2024 and into mid-2025.

The third-quarter earnings season intensifies this week, with major financial institutions—Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley—releasing results. Investors will assess whether earnings have remained resilient despite high interest rates and inflation. Key companies from other sectors, such as Johnson & Johnson, ASML, and Netflix, are also set to report, while Boeing faces scrutiny over a planned 10% workforce reduction and delayed 777X deliveries, impacting its stock. Investors are watching these earnings closely to gauge the economy's health and assess if current stock valuations remain justified, with the S&P 500 trading significantly above its long-term average.

Alongside earnings, focus shifts to crucial economic indicators, with September retail sales data offering insights into U.S. consumer health, while statements from Fed officials may provide hints on future interest rate cuts. Minneapolis Fed President Neel Kashkari and Fed Governor Christopher Waller have struck a cautious tone, with Kashkari indicating limited rate cuts.

Data for Technical Analysis (15Min) CFD US30 DJIA

Resistance : 43157.8, 43159.1, 43161.4

Support : 43153.2, 43151.9, 43149.6                              

15Min Outlook    

Source: TradingView              

Buy/Long 1 If the support at the price range 43148.2 - 43153.2 is touched, but the support at 43153.2 cannot be broken, the TP may be set around 43157.8 and the SL around 43145.7, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 43157.8 - 43162.8, TP may be set around 43172.5 and SL around 43150.7, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 43157.8 - 43162.8 is touched, but the resistance at 43157.8 cannot be broken, the TP may be set around 43151.6 and the SL around 43165.3, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 43148.2 - 43153.2, TP may be set around 43141.0 and SL around 43160.3, or up to the risk appetite.       

Pivot Points Oct 15, 2024 03:21AM GMT