Nasdaq 100 and S&P 500 Forecast: Tech Stocks Lead Recovery Ahead of CPI Data

Wall Street Rebounds as Optimism Grows Ahead of Key Inflation Data

U.S. stocks bounced back on Monday, recovering from last week’s significant losses as traders remained hopeful for a soft landing for the economy. With crucial inflation data expected later this week, investor sentiment shifted positively, especially after concerns over the U.S. economy’s health rattled global markets the previous week. This optimism led to a broad-based rally across major sectors of the market.

At 15:11 GMT, the Dow Jones Industrial Average is trading 40738.71, up 393.30 or +0.97%. The S&P 500 Index is at 5440.49, up 32.07 or +0.59% and the Nasdaq Composite Index is trading 16749.25, up 58.42 or +0.35%.

This broad market strength reflected investor confidence heading into a critical week for economic data. After the S&P 500 and Nasdaq Composite saw their worst weekly performance since March 2023 and 2022, respectively, Monday’s rally provided a much-needed lift, though economic uncertainty remains a key concern.

Sectors Show Strong Gains

Ten of the 11 major S&P 500 sectors closed in positive territory, signaling widespread recovery. Consumer discretionary and information technology stocks were among the leaders, both advancing more than 1%, while the energy sector added 1.06%. Financials, industrials, and materials sectors also gained over 1%, contributing to the rebound. The only laggard was communication services, which slipped by 0.07%, reflecting uneven momentum in some areas of the market.

Tech and Chip Stocks Lead the Rebound

Tech and megacap growth stocks, which faced steep declines last week, were instrumental in driving Monday’s recovery. Tesla and Nvidia both rose over 3%, fueling gains in the tech-heavy Nasdaq. Major semiconductor stocks also rebounded after last week’s sell-off, with the Philadelphia Semiconductor Index climbing 1.8%. These gains helped offset some of the sharp losses from the previous week, providing a solid start to the week for the sector.

Boeing led gains in the Dow, rising 3.3%, while American Express and Caterpillar advanced more than 1%. This reflected strong performance across industries, especially in technology and industrial stocks, as investors sought to capitalize on last week’s market dip.

Key Economic Data Fuels Uncertainty

Despite Monday’s bounce, Wall Street continues to grapple with economic uncertainty, following last week’s disappointing jobs report. The August nonfarm payrolls came in at 142,000, missing expectations of 161,000, leading to concerns over a cooling labor market. However, the unemployment rate matched forecasts, coming in at 4.2%, offering a mixed signal on the economy’s overall health.

These economic concerns added to market volatility, as traders weigh the Federal Reserve’s next move. Expectations have adjusted, with a 71% chance the Fed will cut rates by 25 basis points, according to CME Group’s FedWatch Tool. This week’s upcoming consumer and producer price index (CPI and PPI) reports are now critical, as they will offer further insight into inflation trends and the Fed’s likely policy direction.

Earnings Outlook

This week brings a light earnings schedule, but a few notable names will report. Oracle is set to release its quarterly results after Monday’s closing bell, followed by Petco, Dave & Buster’s, and GameStop after Tuesday’s market close. Kroger’s results will be released before Thursday’s open, while Adobe will report after the bell on Thursday. These reports could offer sector-specific insights that may influence trading behavior later in the week.

Market Forecast

Despite Monday’s recovery, traders should remain cautious. With key inflation data due mid-week, the market’s direction will likely hinge on the CPI and PPI reports. If inflation shows signs of cooling, it could support a continued rally, particularly in tech and growth stocks. However, persistent inflation could trigger renewed volatility. Short-term, the outlook leans bullish, but inflation concerns keep risk elevated.

Trader reaction to the pivot at 5420.50 is likely to set the tone into the close. A sustained move over this level could create the momentum needed to challenge the 50-day moving average resistance at 5538.25 over the near-term.

A failure to hold 5420.50 could lead to a near-term acceleration with plenty of room to the downside before 200-day moving average support at 5257.50.