Market Momentum Builds Ahead of Pivotal Week
As the US presidential election and Federal Reserve policy decision loom, stock futures are gaining traction, setting the stage for a potentially volatile week. The S&P 500 futures have risen approximately 0.2%, following a strong comeback to end a losing week, while Nasdaq 100 futures have edged up 0.1%. Dow Jones Industrial Average futures are hovering just above the flat line.
Earnings Optimism and Rate Cut Hopes
A solid earnings season, with 70% of the S&P 500 having reported quarterly results, has instilled confidence in the market. The benchmark index is on pace for its fifth quarter of earnings growth in a row, rebounding from the 2023 earnings recession. Furthermore, interest rate-cut optimism is building, with investors anticipating a 0.25% rate cut by the Federal Reserve on Thursday.
Presidential Election Uncertainty
The presidential election, a significant risk event for markets, has investors bracing for volatility on Election Day. While the race remains neck-and-neck, weekend polls showed Kamala Harris gaining ground, leading to a surprise lead in Iowa. This shift has caused the dollar to drop by the most in a month, as traders unwind bets on a Trump victory. Treasury yields have also retreated, with the 10-year benchmark yield sliding almost 10 basis points to 4.30%.
Fed Policy Meeting Looms
The Federal Reserve’s two-day policy meeting, kicking off on Wednesday, will be closely watched. Despite signs of stubborn inflation and muddied job market signals, Wall Street is convinced that Chair Jerome Powell will announce a rate cut. The focus will then shift to the Fed’s future actions, with the market now expecting three fewer cuts through the end of 2025 than previously anticipated.
Earnings Reports and Market Movers
This week, several companies, including Super Micro Computer, Arm, and Qualcomm, are set to report their quarterly results. Meanwhile, oil prices have jumped 3% after OPEC+ delayed a planned hike in output by at least a month, and Iran escalated Mideast tensions with a warning of a “crushing response” to Israel’s strikes. As the market navigates these events, investors will be closely watching for signs of volatility and opportunities for growth.
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