S&P 500 and Nasdaq Forecast: Bullish Trends Pause After Record-Setting Rally

U.S. Stock Market Mixed as Investors Digest Fed Rate Cut

U.S. stock indices are showing mixed performance on Friday, with the Dow inching up slightly, while the S&P 500 and Nasdaq Composite retreat after Thursday’s strong gains. The markets remain buoyed by optimism following the Federal Reserve’s interest rate cut, but profit-taking is dampening sentiment across certain sectors.

At 12:51 GMT, Dow Futures are trading 42465.00, up 18.00 or +0.04%. S&P 500 Index Futures are at 5771.75, down 6.25 or -0.11% and Nasdaq Futures are trading 20065.00, down 23.00 or -0.11%.

Record-Breaking Session on Thursday

The market experienced a significant rally on Thursday, with the S&P 500 rising 1.7%, closing above 5,700 for the first time. The Dow surged over 500 points to post its first-ever close above the 42,000 level, both achieving intraday all-time highs. Meanwhile, the Nasdaq Composite outperformed, advancing 2.5%. This bullish movement reflects traders’ positive reaction to the Fed’s decision to cut rates by 50 basis points, marking its first such move since 2020.

All three major indices are tracking for weekly gains. As of Thursday, the S&P 500 is up 1.6% on the week, with the Dow increasing by 1.5%, and the Nasdaq leading with a 1.9% weekly gain.

Russell 2000 on a Hot Streak

Small-cap stocks, represented by the Russell 2000, have also benefited from the Fed’s policy shift. The index gained 2.1% on Thursday, marking its seventh consecutive positive session and its first seven-day winning streak since March 2021. The Russell 2000 is on pace to close the week with a 3.2% gain, underscoring its sensitivity to interest rates. Lower rates tend to benefit smaller companies, which often rely on variable-rate debt, reducing their borrowing costs and boosting investor confidence.

Corporate and Sector Updates

In corporate news, FedEx shares tumbled 13% following a disappointing earnings report and downgraded full-year guidance. The company also reduced its revenue forecast, leading to a sharp sell-off in extended trading. On a more positive note, Nike surged over 7% after announcing that CEO John Donahoe will step down in October, sparking optimism among investors about future leadership.

Energy stocks were among the best performers this week, with the sector up over 4% and contributing to the S&P 500’s overall 1.6% weekly rise. Companies like Baker Hughes and SLB led the rally, gaining 8.9% and nearly 7% respectively. The rise in energy stocks has been fueled by geopolitical tensions in the Middle East and the Fed’s decision to lower rates, which helped stabilize crude oil prices. Despite U.S. crude oil being up less than 1% for the year, it remains down over 11% for the quarter.

Economic Data Boosts Investor Sentiment

On the economic front, jobless claims data released on Thursday showed initial unemployment claims at 219,000 for the week, better than expected and slightly lower than the previous week. This reinforced positive sentiment around the Fed’s rate cut, as the labor market showed no immediate signs of weakening.

Market Forecast

Looking ahead, the overall outlook for U.S. stocks remains cautiously optimistic. The Federal Reserve’s rate cut is likely to continue supporting equity markets, particularly in interest rate-sensitive sectors such as small caps and energy. However, uncertainties around corporate earnings and geopolitical tensions could limit further gains. Traders should expect some consolidation after recent record highs, but the broader trend remains bullish in the near term.

Technically, look for the upside momentum to increase as long as the tech-heavy index remains above the 50-day moving average at 19570.75.