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Things have returned to a bullish order this week -- or so it seems. NVIDIA (NVDA) is up 15.9%; the Philadelphia Semiconductor Index is up 8.2%; the S&P 500 information technology sector is up 6.9%; the Nasdaq Composite is up 5.3%; the Vanguard Mega-Cap Growth ETF (MGK) is up 5.2%; and the S&P 500 is up 3.5%.
Treasury yields are down and the probability of a 50-basis points rate cut at the September FOMC meeting has risen to 43% from 30% a week ago, according to the CME FedWatch Tool.
Remarkably, the S&P 500 went from its low of 5406.96 on Wednesday to 5600.71 at its high yesterday. That's a 3.6% move just like that!
It has all gone the stock market's way, and the week isn't over yet. The rebound impulse is still pulsating in the equity futures market.
Currently, the S&P 500 futures are up 13 points and are trading 0.3% above fair value; the Nasdaq 100 futures are up seven points and are trading fractionally above fair value; and the Dow Jones Industrial Average futures are up 93 points and are trading 0.3% above fair value.
Several catalysts are influencing this positive disposition:
- Oracle (ORCL) has fed the ongoing AI excitement by raising its FY26 revenue outlook. Oracle is up 6.3% in pre-market trading, and including that gain, it is up 21% this week.
- High-end furniture retailer RH (RH) is up 19% following its better than expected earnings report and comment that it expects demand trends to accelerate throughout FY24 and into FY25.
- The heightened probability of the Fed cutting rates by 50 basis points next week
- Another batch of pleasing inflation news
- Import prices were down 0.3% month-over-month in August (and up 0.8% yr/yr). Excluding fuel, they were down 0.1% month-over-month (and up 1.3% yr/yr). Export prices were down 0.7% month-over-month in August (and down 0.7% yr/yr). Excluding agricultural products, they were down 0.6% month-over-month (and down 0.1% yr/yr).
- Ongoing rebound momentum
It isn't all rainbows this morning. Dow component Boeing (BA) is down 3% as the company contends with its machinists union going on strike after overwhelmingly rejecting Boeing's contract proposal. Software company Adobe, Inc. (ADBE) is down 8% after beating fiscal Q3 expectations but disappointing with its fiscal Q4 revenue guidance.
These specific developments, however, haven't derailed the equity market. They have slowed some of the rebound momentum perhaps, along with the recognition that the yen is showing some strength against the dollar. The latter has a tendency of creating some angst about a further unwinding of carry-trade positions.
The real headwind at the moment, though, may just be how far the rebound tailwind has pushed so many stocks and the major indices in a short amount of time. There could be an inclination to back away from buying efforts going into the weekend, but the onus is on the bears to push back on that tailwind.
