Optimism About Tech Earnings, Rate Cut May Lead To Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to add to the strong gains posted last Friday.

Optimism ahead of the release of earnings news from several major technology companies may contribute to early strength on Wall Street.

Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) are among the companies due to report their quarterly results this week.

The markets may also continue to benefit from optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting this week.

While the Fed is widely expected to leave interest rates unchanged, traders will be looking to the accompanying statement to increase confidence about a rate cut in September.

According to CME Group’s FedWatch Tool, there is currently an 89.6 percent chance the Fed will lower rates by a quarter point in September and a 10.1 percent chance of a half point rate cut.

Later in the week, the focus is likely to shift to the Labor Department’s closely watched monthly jobs report for July.

Following the mixed performance seen in Thursday’s session, stocks moved sharply higher during trading on Friday. The major averages all showed strong moves to the upside, with the Nasdaq and the S&P 500 bouncing off their lowest closing levels in over a month.

The major averages ended the day off their best levels of the session but still firmly in positive territory. The Dow surged 654.27 points or 1.6 percent to 40,589.34, the Nasdaq shot up 176.16 points or 1.0 percent to 17,357.88 and the S&P 500 jumped 59.88 points or 1.1 percent to 5,459.10.

For the week, the Dow advanced by 0.8 percent, but the S&P 500 slid by 0.8 percent and the Nasdaq slumped by 2.1 percent.

The strength on Wall Street came as the release of closely watched inflation data by the Commerce Department added to confidence about an interest rate by the Federal Reserve in September.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in June after coming in unchanged in May. The uptick by the index matched expectations.

The report also said the annual rate of growth by the PCE price index slowed to 2.5 percent in June from 2.6 percent in May. The slowdown in year-over-year growth also met estimates.

Meanwhile, the Commerce Department said the core PCE price index, which excludes food and energy prices, rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected another 0.1 percent uptick.

The annual rate of growth by the core PCE price index was unchanged from the previous month at 2.6 percent in June, while economists had expected the pace of growth to slow to 2.5 percent.

“The subdued rise in prices will give the Federal Reserve greater confidence that inflation is on track to moderate toward its 2% target,” said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.

He added, “While we are not expecting the news to be quite as good in coming months, we think it would take a nasty upward surprise to inflation between now and September to derail the Fed from cutting rates at that meeting.”

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The report showed personal income rose by less than expected, while personal spending increased in line with economist estimates.

The University of Michigan also released revised data showing consumer sentiment in the U.S. deteriorated by slightly less than previously estimated in the month of July.

The report said the consumer sentiment index for July was upwardly revised to 66.4 from the preliminary reading of 66.0. Economists had expected the reading to be unrevised.

Despite the upward revision, the consumer sentiment index for July is still down from 68.2 in June and marks the lowest reading since November 2023.

Housing stocks turned turn in some of the market’s best performances on the day, with the Philadelphia Housing Sector Index soaring by 3.2 percent to a record closing high.

Substantial strength also emerged among telecom stocks, as reflected by the 2.6 percent surge by the NYSE Arca North American Telecom Index.

Semiconductor and networking stocks also saw considerable strength, contributing to the jump by the tech-heavy Nasdaq.

Commercial real estate, transportation and steel stocks also showed notable moves to the upside amid broad based strength on Wall Street.

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