US Market Post Gains, Despite Friday’s Decline
US market posted gains for a third consecutive week, despite a weaker performance on Friday. Investors remained confident that the economy is cooling without tipping into a severe downturn.
Treasuries rallied as well, with data reinforcing expectations of further interest rate cuts by the Federal Reserve. Yields dropped across the board, with the 10-year rate hovering near 3.75%. Meanwhile, the Bloomberg Dollar Spot Index recorded its fourth consecutive weekly decline.
Economic Data and Inflation Insights
The Fed’s favoured measure of underlying US inflation showed a slight rise in August, as did inflation-adjusted consumer spending. These numbers aligned with the broader economic data released earlier in the week, offering traders further insights into the economy’s strength. On Friday, US consumer sentiment data also reflected this optimism.
Fed’s Remarks Offer Little New Guidance
Fed officials provided little new information to shift market expectations regarding the central bank’s direction. St. Louis Fed President Alberto Musalem expressed support for a gradual reduction in rates following last week’s significant cut.
Fed Governor Michelle Bowman reaffirmed her view that the US economy remains robust. However, Fed Chair Jerome Powell, in pre-recorded remarks on Thursday, did not offer any new details about the economic outlook or future monetary policy.
Global Developments: China and Central Banks
Investor sentiment remained positive thanks to daily stimulus updates from China, which bolstered global market optimism. Additionally, central banks in Switzerland, Mexico, Hungary, and the Czech Republic announced interest rate cuts, further contributing to the favorable backdrop.
Tech Sector Weighs on Friday’s Performance
Despite the overall positive momentum throughout the week, the S&P 500 and Nasdaq 100 ended Friday’s session in the red, largely due to a drop in Nvidia Corp. shares. Nvidia’s stock fell after reports surfaced that China was advising local firms to avoid using its chips.
Weekly Market Recap
For the week:
S&P 500: +0.6%
Nasdaq Composite: +1.0%
Dow Jones: +0.6%
Friday’s Closing Levels:
| Index | Close | Change | % Change |
| Dow Jones | 42,313.00 | +137.89 | +0.33% |
| S&P 500 | 5,738.17 | -7.20 | -0.13% |
| Nasdaq Composite | 18,119.59 | -70.70 | -0.39% |
| US 10-Year Yield | 3.751% | ||
| VIX | 16.96 | +1.59 | +10.34% |
Market Outlook: Are We Heading for a Pullback?
By the end of the week, the market seemed to be showing signs of fatigue. Some would even say it looked exhausted. Trading ranges are becoming narrower, volumes are lighter, and attempts at new highs aren’t seeing strong follow-through.
While the overall trend remains bullish and momentum is still upward, there are signs of a potential short-term pullback before the market makes another attempt at new highs. With the month and quarter ending on Monday, it’s not uncommon for traders to lock in their profits for the year to ensure solid year-end bonuses.
Shifting Sentiment: China’s Impact and Payroll Data
One significant shift last week was the introduction of a massive stimulus package from China. For a while, US stocks had been “the only game in town,” but with money flowing back into Chinese stocks—especially those previously heavily shorted—the relative gains from a Chinese market rally could outpace those in the US. This could attract capital away from US markets and into China.
Looking ahead to next week, the release of payroll data on Friday will be a key event. The question is how the market will react to a strong payroll report.
Before the upcoming elections, it is possible that we will see a “friendly” payroll number. The key will be whether the market rallies on positive news or sells off in response to the expectation of fewer rate cuts from the Fed.
The market needs to rally and sustain those gains on good news; otherwise, the bears could take control, leading to a long-awaited market reversal.
Source: CBOE, Bloomberg
This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable US bank exceeding 20 years.
Risk Disclosure
Securities, Futures, CFDs and other financial products involve high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding your initial investment could incur within a short period of time.
Please make sure you fully understand the risks of trading with the respective financial instrument before engaging in any transactions with us. You should seek independent professional advice if you do not understand the risks explained herein.
Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it.
The above strategies reflect only the analysts’ opinions and are for reference only. They should not be used or considered as the basis for any trading decisions or as an invitation to engage in any transaction. Doo Prime does not guarantee the accuracy or completeness of this report and assumes no responsibility for any losses resulting from the use of this report. Do not rely on this report to replace your independent judgment. The market is risky, and investments should be made with caution.
