Dow Jones and Nasdaq 100: Tech Stocks Surge as Fed Decision Looms

U.S. Stocks Rally Ahead of Fed Decision

U.S. stock indexes surged on Wednesday, led by tech giants as investors awaited the Federal Reserve’s latest monetary policy decision. The market’s upward momentum was fueled by strong earnings in the semiconductor sector and expectations of a dovish Fed stance.

At 15:00 GMT, the Dow Jones Industrial Average is trading 40924.74, up 181.41 or +0.45%. The S&P 500 Index is at 5523.07, up 86.63 or +1.59% and the Nasdaq-100 Index is trading 17563.80, up 416.39 or +2.43%.

Tech Sector Leads the Charge

Nvidia shares skyrocketed 11%, marking its best day since February, following Advanced Micro Devices‘ better-than-expected results. This rally reignited optimism in the AI trade, with AMD climbing over 6%. Other chipmakers also benefited, with Qualcomm and Marvell Technology up at least 4% each. The VanEck Semiconductor Index jumped more than 6%, heading for its strongest session since February.

Broader Market Movements

While tech stocks dominated the gains, other sectors also saw positive movement. Boeing added 1.7% after announcing a new CEO, despite reporting wider-than-expected losses. However, Humana slid more than 8.5% due to weak guidance. Microsoft bucked the trend, pulling back 1% on disappointing quarterly cloud revenue.

Fed Decision in Focus

Investors are closely watching the Federal Reserve’s two-day policy meeting conclusion. The central bank is expected to keep rates steady, but market participants are eager for signs of potential rate cuts in the near future. Bank of America economists suggest that while the Fed is optimistic about future cuts, it may not signal a definite September reduction.

Economic Indicators

Recent jobs data supports the Fed’s efforts to reduce inflation. The ADP report showed private job growth slowing in July, with wage gains dropping to a three-year low. This data hints at a cooling economy, potentially influencing the Fed’s decision-making process.

Market Forecast

The market’s bullish sentiment is likely to persist in the short term, driven by tech sector strength and anticipation of a dovish Fed stance. However, investors should remain cautious as the Fed’s actual decision and subsequent commentary could introduce volatility. The focus on AI and semiconductor stocks suggests continued outperformance in these sectors, while broader market gains may be more measured pending clear signals on the future direction of interest rates.

Technical Analysis

E-mini S&P 500 Index futures are soaring on Wednesday after crossing to the strong side of the uptrending 50-day moving average at 5510.06. If this move continues to generate upside momentum then look for a test of the short-term pivot at 5577.00.

The 50% level at 5577.00 is both resistance and a trigger point for another upside  breakout. So watch the price action and read the order flow as the benchmark nears this level.

On the flipside, falling back below the 50-day MA will be a sign of weakness. If it attracts enough sellers, we could see a retest of the pivot at 4463.25, the last support before the bottom at 5432.50.