Dow Jones, S&P 500: Stock Market Rises Today on Fed Rate Cut Speculation

Wall Street Gains as Investors Focus on Inflation Data and Q3 Earnings

U.S. stocks rebounded on Tuesday as traders shifted their focus to third-quarter earnings and upcoming inflation data, with major indexes posting gains after a volatile start to the week. Wall Street had experienced a broad sell-off on Monday, driven by rising Treasury yields, geopolitical concerns, and uncertain rate expectations. However, sentiment improved as investors looked ahead to key data that could offer clues on the Federal Reserve’s interest rate policy.

The S&P 500 gained 0.77%, led by a strong performance in the technology sector, while the Nasdaq Composite rose by 1.16%. The Dow Jones Industrial Average inched up 83 points, marking a recovery from Monday’s losses. The positive momentum was sparked by hopes that inflation data later in the week would clarify the Federal Reserve’s trajectory on rate cuts.

Technology Stocks Drive Gains, Energy Lags

The technology sector led the rally, with the S&P 500’s tech index rising 1.8%. Big names like Nvidia and Broadcom saw substantial gains of 3% and 2%, respectively, while Microsoft and Meta Platforms each rose by over 1%. This surge in tech came as investors speculated that upcoming inflation data might provide enough justification for the Federal Reserve to ease monetary policy sooner than anticipated.

In contrast, the energy sector struggled, with energy stocks dropping nearly 3%. Marathon Petroleum and Valero Energy posted losses of over 4%, as oil prices fell by nearly 4% following Monday’s rally. West Texas Intermediate crude dropped to $74.89 per barrel as concerns eased over potential disruptions in Middle Eastern oil supplies. The retreat in oil prices pressured energy stocks, contributing to the sector’s underperformance.

Earnings and Economic Data Under Scrutiny

With the third-quarter earnings season kicking off, investor attention is focused on corporate results and forward guidance. Major banks, including JPMorgan Chase and Citigroup, are set to report on Friday, with analysts projecting a 5% earnings growth rate for the S&P 500. PepsiCo led early earnings news, rising 1.2% after posting better-than-expected earnings, though it lowered its forecast for annual sales growth.

In the economic landscape, traders are closely watching inflation data scheduled for release on Thursday. The consumer price index (CPI) will be a key factor in determining the Federal Reserve’s next move. Market sentiment currently suggests an 89% probability of a 25 basis point rate cut at the Fed’s next meeting, a shift from expectations of a 50 basis point cut.

Chinese Stocks Hit by Stimulus Concerns

U.S.-listed shares of Chinese companies plunged after China’s economic planning agency failed to announce new stimulus measures. Alibaba, JD.com, and PDD Holdings fell between 6% and 7%, reflecting growing pessimism about China’s economic prospects. The MSCI China ETF dropped 10.7%, marking its worst day since 2011, as investor sentiment soured on the lack of significant economic support from Beijing.

Market Outlook: Awaiting Inflation Data for Fed Cues

The market’s short-term direction hinges on the upcoming inflation report, which could either reinforce or temper expectations of an interest rate cut. If inflation shows signs of cooling, traders are likely to grow more confident in a dovish shift from the Federal Reserve. However, strong economic data or persistent inflation could keep Treasury yields elevated and pressure stocks. For now, sectors sensitive to interest rates, like technology, remain positioned for gains, while energy may continue to struggle amid falling oil prices.