Last week, the S&P 500 (SPY) ETF added 4.01% to close at less than 1% away from its July 2024 all-time high. The Nasdaq (QQQ) performed even better by adding 5.94%. Stock markets are pricing in a series of Federal Reserve rate cuts this month and through 2025.
The utilities and communications service and industrials added around 1.0% each last Friday. Bond yields are now at 52-week lows. Expect them to continue falling, increasing the attractiveness of buying stocks from here.
Cautious investors who lost money in 2024 are in a tough spot. They are watching popular chipmakers like Super Micro Computer (SMCI) and Arm Holdings (ARM) rally. Magnificent seven firms like Alphabet (GOOG) and Microsoft (MSFT) are also rebounding. Volatility is also falling sharply. This would suggest that investors do not expect any panic selling for the rest of September or October.
The Fed will set the market’s sentiment for the rest of the week. Economic data supports continued interest rate cuts. For example, the consumer price index in August of 2.5% annualized indicates that inflation is moderating. The CPI is at its lowest level since February 2021.
Wholesale prices (producer costs) increased by 0.2% last month. The uneventful report is in line with the market’s expectations.
