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Nasdaq 100, Dow Jones, S&P 500 News: Fed Rate Cut Speculation Drives Market Optimism

By:
James Hyerczyk
Updated: May 15, 2024, 14:53 GMT+00:00

Key Points:

  • CPI rises only 0.3%, S&P 500 and Nasdaq climb 0.6% to record highs.
  • Mild inflation raises hopes for Fed rate cuts in September.
  • AMC and GameStop's shares fall sharply, highlighting market volatility.
Nasdaq Composite, S&P 500, Dow Jones

In this article:

U.S. Stocks Reach New Peaks as Inflation Data Surprises

Wall Street indices hit record levels on Wednesday, buoyed by a U.S. consumer inflation report that came in below expectations. The S&P 500 and Nasdaq Composite each advanced by 0.6%, while the Dow Jones Industrial Average increased by 141 points, or 0.36%. The consumer price index (CPI) rose just 0.3% in April, under the 0.4% predicted by economists, with a year-on-year increase of 3.4%, matching projections.

Inflation Outlook Boosts Rate Cut Expectations

The milder inflation figures have heightened anticipations for the Federal Reserve to lower interest rates, with market data now forecasting a 51.7% chance of a rate cut at the Fed’s September meeting. This sentiment has been reinforced by Federal Reserve officials suggesting that further rate hikes may not be necessary, giving traders confidence in a potentially looser monetary policy ahead.

Artificial Intelligence and Economic Data Elevate Market Sentiment

Enhanced by artificial intelligence prospects and robust economic indicators, the broader market has seen substantial gains, with the S&P 500 up more than 10% since the start of the year. Investor optimism has largely shrugged off prior concerns over persistent price rises, evident in the broad market’s recent performance.

Meme Stock Phenomenon Resurges with AMC and GameStop

The trading session also spotlighted a resurgence in meme stock activity, particularly involving AMC and GameStop. AMC’s shares plummeted by 22% following the announcement of a debt-for-equity swap involving the issuance of 23.3 million shares. GameStop shares also declined sharply by 29%, despite a significant rally earlier in the week triggered by a social media post from influential trader “Roaring Kitty.” These stocks have shown extreme volatility, fueled by speculative trading and social media influence, contrasting sharply with the general market trends.

Market Forecast: Continued Optimism with Cautious Monitoring of Volatility

The overall market outlook remains positive, with expectations of supportive monetary policy and ongoing corporate growth, particularly in tech and AI sectors. However, traders are advised to remain cautious of volatility, especially in meme stocks which have shown significant price swings influenced by social media and retail trader sentiment. Despite potential disruptions from sectors prone to speculative trading, the prevailing economic conditions and policy expectations suggest that the bullish trend in major indices is likely to persist.

Technical Analysis

Daily E-mini S&P 500 Index

E-mini S&P 500 Index futures are sharply higher on Wednesday after the first hour of trading. This move follows a jump in the cash market to a record high.

The next upside target for the futures contract is the April 1 top at 5333.50. The major support is the 50-day moving average at 5195.63. This is controlling the intermediate uptrend.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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