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U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist

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Moomoo News Global wrote a column · Mar 22 10:02
All three major U.S. indexes notched new record highs on March 21st, propelled by optimism spurred by Federal Reserve Chair Jerome Powell stating that the central bank stayed on track for three interest rate cuts this year and affirmed that solid economic growth will continue.
The $Dow Jones Industrial Average(.DJI.US)$ ended Thursday shy of 40000 points. $S&P 500 Index(.SPX.US)$ gained 9.89%, and the tech-heavy $Nasdaq Composite Index(.IXIC.US)$ gained 9.26% in 2024 as of Thursday.
U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist
Federal Reserve Chiar Jerome Powell stated that the timing of those reductions still depends on officials becoming more confident that inflation will continue to decline towards the Fed's 2% target even as the economy continues to outperform expectations. Powell was speaking following a policy meeting at which officials maintained their outlook for three cuts in borrowing costs this year and left the benchmark overnight interest rate in the 5.25%–5.50% range.
With the bulls dominating the market so far this year, the record-breaking rally in U.S. stocks was led by these major contributors:
S&P 500 Index
U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist
The S&P 500 has advanced 9.89% this year, outperforming both the Nasdaq and the Dow Jones Industrial Average. Nvidia, the AI darling, has led the index with an impressive 84% surge this year. Meanwhile, $Meta Platforms(META.US)$, one of the 'Magnificent Seven' tech giants, has rebounded from its 2022 trough, registering a 43.6% gain year-to-date."
Additionally, energy companies have been performing well. $Constellation Energy(CEG.US)$ saw its shares jump nearly 50% year-to-date, while $GE Aerospace(GE.US)$ rose close to 40%, and both a major American oil company $Marathon Petroleum(MPC.US)$, and $Valero Energy(VLO.US)$, the largest North American refining company, increased over 30%.
Nasdaq Composite Index
U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist
This year, the rise of the Nasdaq has been powered by the AI industry. Despite the recent tepid performance, $Super Micro Computer(SMCI.US)$ has still amassed year-to-date gains of 240%. Meanwhile, $NVIDIA(NVDA.US)$ has soared over 84%, $Arm Holdings(ARM.US)$ has increased nearly 78%, and the remaining top ten performers have each climbed over 29%.
Dow Jones Industrial Average
U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist
This year, $Disney(DIS.US)$ saw its share price approach a 30% increase, with its market value once again surpassing $200 billion. Furthermore, in the retail sector, $Amazon(AMZN.US)$, $Walmart(WMT.US)$, and $Home Depot(HD.US)$ have all seen their share prices ascend more than 14%.
As U.S. stocks sustain their vigorous rally, an increasing number of Wall Street investment banks are adopting bullish stances.
A day after the index SPX logged its 19th record close of 2024, Société Générale analysts raised their year-end objective to 5,500 from 4,750 a day, implying further upside of little over 5% from this point. This is the most optimistic target among Wall Street’s biggest banks, according to MarketWatch.
Société Générale stated in the report that the continued rise in U.S. equities is supported by a solid macroeconomic foundation and robust corporate profit growth in the U.S. Analyst from the French Bank believes there are three macroeconomic themes bolstering this view.
Firstly, the "reshoring wave" refers to the trend of U.S. companies relocating businesses or production lines back to domestic territory. This has encouraged local manufacturing and contributed to America's "reindustrialization."
Secondly, the "AI wave." Société Générale posits that without the push from the artificial intelligence boom, the S&P 500 might have only reached around 4,400 points.
Lastly, "credit improvement." With recent enhancements in the U.S. credit environment and lending standards. The bank maintains an optimistic outlook on the American financial sector.
However, this uptrend in the U.S. stock market has also prompted "bubble warnings" from Wall Street analysts, such as Bank of America's Chief Investment Strategist Michael Hartnett and JPMorgan's Chief Market Strategist Marko Kolanovic.
With inflation re-accelerating, growth a little soft, and risk assets unscathed, "that is very symptomatic of a bubble mentality," Hartnett said in a Bloomberg TV interview on March 14, highlighting the "Magnificent Seven" and the cryptocurrency sector.
Source: Bloomberg
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