Dow Jones: Industrial Average Climbs Amid Strong Consumer Sentiment and Tech Rally

U.S. Stock Market Rebounds as Major Indices Eye Strongest Week of 2024

U.S. stock indices are trading higher at the mid-session on Friday, signaling a remarkable recovery in the markets. This rebound follows a tumultuous start to August, with the S&P 500, Nasdaq, and Dow Jones Industrial Average all on track to close out their best week of the year. The S&P 500 has surged nearly 4% this week, positioning it for its strongest performance since November 2023. The Nasdaq and Dow are also up significantly, rising 5% and 3%, respectively.

At 16:20 GMT, the Dow Jones Industrial Average is trading 40635.76, up 72.70 or +0.18%. The S&P 500 Index is at 5552.69, up 9.47 or +0.17% and the Nasdaq 100 Index is trading 17634.81, up 40.31 or +0.23%.

Consumer Sentiment Beats Expectations

Positive economic data has played a crucial role in boosting investor confidence this week. The University of Michigan’s latest survey showed that consumer sentiment in August surpassed expectations, climbing to 67.8 from July’s 66.4. This increase outpaced the Dow Jones estimate of 66.6, reflecting stronger-than-anticipated consumer confidence. However, not all indicators were positive. The current conditions index dropped to its lowest level since December 2022, while the expectations index rose to 72.1, indicating mixed sentiment about future economic conditions. Importantly, inflation expectations remained stable, with the one- and five-year outlooks holding steady at 2.9% and 3.0%, respectively.

Housing Market Weakens as Interest Rates Bite

In contrast to the positive sentiment data, the U.S. housing market showed signs of strain. Housing starts and building permits in July fell to their lowest levels since June 2020, as rising interest rates continued to weigh on the sector. The Commerce Department reported that housing starts decreased by 6.8% from June to 1.238 million, significantly below the expected 1.34 million. Building permits, a leading indicator of future construction activity, also fell by 4% to 1.396 million, missing forecasts. This ongoing weakness in the housing market underscores the challenges posed by elevated borrowing costs.

Nvidia Leads Tech Rally

Among the standout performers this week is Nvidia, whose shares have surged 18% after four consecutive weeks of losses. This marks Nvidia’s best weekly performance since May 2023, with the stock up an impressive 149% year-to-date. The broader technology sector has also benefited, with Apple and Microsoft advancing roughly 4% and 3%, respectively. Nvidia’s rally comes as investors regain confidence following the sharp sell-off in technology shares earlier this month.

Gold Hits New High

Gold futures also made headlines, climbing 1.4% to a new intraday all-time high of $2,537.5 on Friday. The metal has gained around 2.2% for the week, marking its third consecutive positive week. The VanEck Gold Miners ETF mirrored this trend, gaining 2% on Friday and 6% for the week.

Market Forecast

Looking ahead, the market appears poised for further gains as strong economic data, particularly in consumer sentiment, helps alleviate fears of an imminent recession. The resilience in key tech stocks, led by Nvidia, suggests that investors remain optimistic about growth prospects, despite ongoing concerns in the housing market. If current trends persist, the S&P 500 could challenge its mid-July record high in the coming weeks, signaling a potential continuation of the bull market.

Technical Analysis

E-mini S&P 500 Index futures are edging higher at the mid-session on Friday. The market is hovering just above the key support at 5514.50, or the 50-day moving average. If this level fails to hold then look for momentum to shift to the downside with 5420.50 the next likely target.

A sustained move over the 50-day MA will signal the presence of buyers. This could lead to a late session test of the main top at 5600.75. Although traders could face some headwinds on the initial test of this level, it is also the trigger point for an acceleration to the upside with 5721.25 the next likely target.