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This is a follow up article: S&P 500 wraps up August gains as rate cut decision looms.
US stock indices remained firm, indicating that the positive momentum from Thursday’s session could continue.
Wall Street has been riding a wave of optimism, with the S&P 500 (Symbol: SP500) gaining 0.75%, the Dow Jones (Symbol: DJ30) rising 0.58%, and the Nasdaq Composite (Symbol: NAS100) climbing 1%.
Picture: S&P stables as markets anticipate rate cuts, as observed on the VT Markets app.
The S&P 500 has seen a strong rally over the past four days, driven largely by renewed investor confidence in the technology sector. The index closed at 5608.80 after reaching an intraday high of 5615.30, up 0.17% for the session. The 30-minute chart highlights the momentum behind this rally, with prices bouncing off a key support level at 5412.35 on September 12th, and continuing upward since then.
Technical indicators show bullish signals. The EMA (24, 24, 72) indicates a positive trend, with the 24-period moving average above both the 72 and 30-period moving averages, reflecting sustained buying pressure. Meanwhile, the MACD is above the zero line, signaling bullish momentum, although there is a slight flattening in the histogram, suggesting that upward momentum might be stabilising.
While the tech rally has fueled much of the upward move, market participants are now turning their attention to upcoming economic data, particularly inflation reports, which could shape the Federal Reserve’s rate decision. A continuation of this bullish trend depends on broader market sentiment remaining positive, especially in the face of potential volatility from macroeconomic factors.
Several mega cap tech stocks spearheaded the rally, with Nvidia surging 1.9%, Broadcom jumping 4%, and Meta Platforms advancing 2.7%.
Tech heavyweights like Amazon (1.3%) and Alphabet (2.3%) also contributed to the broader tech sector’s gains, as these companies continue to attract investor attention with growing optimism around AI and cloud services.
Investors have been keenly eyeing inflation data for clues on the Federal Reserve’s next steps. On Thursday, US producer prices rose more than expected for August, sparking some concern. However, the broader market view remains that the Fed is likely to begin cutting interest rates as early as next week.
Related content: Interest rate tug-of-war for central banks
Traders currently see a 59% probability of a 25 basis point rate cut, while the chance of a 50 basis point reduction stands at 41%.
All 11 sectors of the S&P 500 finish in the green, with communication services, consumer discretionary, and energy leading the charge. This broad-based gain is reflective of growing confidence that the economy is resilient enough to withstand the impacts of inflation, while lower interest rates will likely support growth.
That said, there is still some caution. The rise in producer prices could complicate the Fed’s decision, as inflation remains a key concern. If inflation proves to be more stubborn, the Fed may opt for a less aggressive rate cut or delay further cuts.
For short-term traders, volatility may increase in the lead-up to the Fed’s decision next week. Many will be looking to lock in gains or hedge positions in anticipation of potentially market-moving data. A larger-than-expected rate cut could fuel a continued rally, especially in interest-sensitive sectors like technology and real estate. Conversely, a more measured approach by the Fed may cause some profit-taking in these sectors.
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