S&P 500 Forecast: Will Rate Cut Speculation Push US Indices Toward a Record High Today?

Stock Futures Steady as Fed Rate Cuts Loom

Stock futures remained stable on Monday, with investors anticipating potential rate cuts following recent comments by Federal Reserve Chair Jerome Powell. Powell’s remarks have boosted market sentiment, driving equities closer to record highs. Wall Street is focused on the Fed’s next move, with many expecting rate cuts as early as September.

At 10:26 GMT, Dow futures are up 0.14%. S&P 500 Index futures are 0.16% higher and Nasdaq 100 Index futures are 0.03% lower.

Key Stocks in Focus: Boeing, PDD Holdings, and More

Boeing shares dropped over 1% after NASA selected SpaceX over Boeing’s Starliner to return astronauts from the International Space Station. Despite Boeing’s assurances of Starliner’s safety, NASA’s differing assessment led to the decision, impacting Boeing’s stock.

PDD Holdings, the parent company of Temu, plunged 16% after disappointing second-quarter earnings. The China-based retailer missed revenue expectations and cited increased competition as an ongoing challenge.

Meanwhile, BJ’s and Planet Fitness posted gains. BJ’s stock rose over 1% after JPMorgan upgraded the company, noting benefits from reinvestment and changing consumer behavior. Planet Fitness advanced by 1.5%, buoyed by a bullish rating from Baird, which views the gym chain as a strong investment in a slow-growth environment.

Petrobras gained 2.3% after Morgan Stanley upgraded the stock, expressing confidence in the company’s new leadership and consistent strategy. SolarEdge Technologies surged over 6% following the announcement of a leadership change, which was received positively by investors.

Powell’s Comments Draw Varied Market Reactions

Powell’s recent comments have sparked diverse opinions among market experts. His suggestion of forthcoming rate cuts has fueled optimism, though analysts are split on the market’s direction.

UBS forecasts the S&P 500 could rise by up to 5% by year-end, supported by the expected rate cuts, ongoing growth in artificial intelligence (AI), and solid earnings. UBS remains optimistic despite potential geopolitical concerns and election-related volatility, emphasizing the AI sector’s continued growth potential despite recent challenges in the tech sector.

Conversely, Oppenheimer recommends shifting towards defensive value stocks as indicators suggest slower economic activity. They advise moving from cyclical to defensive positions, noting that low-volatility leadership could pressure small-cap stocks.

However, not all analysts foresee an imminent rate cut. Ed Yardeni of Yardeni Research cautions that stronger-than-expected economic data in the coming weeks could dampen expectations for a September rate cut. Yardeni notes that while Powell’s dovish tone at Jackson Hole was bullish for stocks, the market may have already factored in these expectations, possibly leading to a cooling of the recent rally.

Market Forecast

The market outlook remains cautiously optimistic as traders weigh the potential for rate cuts against upcoming economic data. While the S&P 500 may see further gains, supported by Fed policy and earnings growth, the possibility of stronger economic news could temper expectations, leading to short-term volatility. Investors should stay alert, closely monitoring economic indicators and Fed communications as the next policy meeting approaches.

Technical Analysis

There are only two points on the chart that E-mini S&P 500 Index futures are watching. The first is support at the 50-day moving average at 5535.90. The second is the all-time high at 5721.25.

With the trend up, traders are more concerned about how and when the high will  be tested. Will it be a spike to the upside, or a steady climb? After the recent collapse in prices, traders aren’t too concerned about the downside since they are comfortable that buyers will come in strong on any dip back to the 50-day MA.