NASDAQ Index, SP500, Dow Jones Forecasts – Powell’s Rate Cut Hints Boost, Banking Woes Dampen Spirits

U.S. stocks are trading higher into the last two hours of the trading session on Wednesday, rebounding after recent losses, bolstered by Fed Chair Jerome Powell’s testimony indicating potential interest rate cuts. Powell suggested the current policy rate might be at its peak, hinting at a less restrictive approach later in the year, depending on economic data.

This news invigorated investors, leading to significant gains in tech stocks like CrowdStrike and Palantir. However, Apple and Tesla faced declines, with Tesla particularly struggling. The market’s uptick was tempered by troubles in the retail sector, including Nordstrom and Foot Locker, and concerns over regional banks, exemplified by New York Community Bancorp’s plunge.

Nonetheless, the response by investors was not particularly bullish, but more like a quick reaction to Powell. In other words, they bought because Powell wasn’t as hawkish as before. Additionally, stocks started topping out with the NYCB news hit the market.

S&P 500 Index

The S&P 500 reflected a mix of responses as Federal Reserve Chair Jerome Powell indicated potential rate cuts. While some sectors rallied, others, like retail and regional banking, faced challenges. The news of Powell’s cautious yet optimistic stance regarding rate adjustments provided a boost, but concerns lingered in certain market segments.

Technically, the benchmark index is higher but inside yesterday’s range that indicates investor indecision and impending volatility. The fact that the index did not make a new all-time high on Powell’s comments suggests a tired trend.

A move through 5157.25 will signal a resumption of the uptend, while a trade through 5060.00 will change the main trend to down.

Nasdaq-100 Index

The Nasdaq saw notable gains, largely fueled by the technology sector’s recovery. Companies such as CrowdStrike and Palantir led the surge with impressive earnings and significant contract wins. However, major players like Apple, Alphabet, and Tesla did not share in the uptrend, with Tesla, in particular, experiencing a significant downturn, marking a challenging year for the electric vehicle giant.

Technically, the E-mini Nasdaq-100 Index is higher, but the rally hasn’t been that impressive, suggesting an almost “kneejerk” reaction to Powell’s comments. The inside move indicates investor indecision and impending volatility.

A trade through 17826.00 will change the short-term trend to down and could trigger a break into the 50-day moving average at 17477.69. The buying would have to be strong enough to take out 18377.75 to signal a resumption of the uptrend.

Dow Jones Industrial Average

The Dow Jones Industrial Average, while less influenced by the tech sector’s volatility, also responded to Powell’s remarks. The index showed a more measured reaction, with movements reflecting the broader market’s cautious optimism and the balancing act between different sector performances.

E-mini Dow Jones Industrial Average futures are higher late Wednesday, but well off their best performance of the session. Although there were gains, this has not been the market’s best response to positive comments from Powell.

In fact, the Dow is closer to turning the intermediate trend lower on a trade through the 50-day moving average at 38367 than it is posting a new all-time high. A break through this level could trigger an acceleration to the downside.