The Dow finished Monday up 321 points, 07%, at 32,383, the Nasdaq Composite added 154 points, 1.3%, to 12,266 and the S&P 500 improved 43 points, 1.1%, to 4,111
The Dow finished Monday up 321 points, 07%, at 32,383, the Nasdaq Composite added 154 points, 1.3%, to 12,266 and the S&P 500 improved 43 points, 1.1%, to 4,111.
The closing bell marked the fourth consecutive winning day for the major indices. Among the leaders was Apple Inc (NASDAQ:AAPL), shares of which gained nearly 4% to $163.43 after the company revealed promising pre-order data for the iPhone 14 Pro Max.
“The combination of the somewhat surprising successes in Ukraine, and the [possibility] of very favorable inflation headline that maybe even shows a decline for last month, may put us into a situation where we have a continued rally here,” said Phillip Toews, CEO of Toews Asset Management, according to CNBC. “And at that point the main threat in the short term and in the medium term will be whether earnings continue to deteriorate.”
Investors are also looking ahead to Tuesday morning when the August Consumer Price Index report will be released.
US indices could be in a lull before the storm, as gains seen midday could be reversed when data on the consumer price index is published this week.
At midday, the Dow Jones Industrial Average was up 0.54% to 32,324, the S&P 500 was up by 0.68% at 4,095, while the Nasdaq Composite was up by 0.63% at 12,188.
Chris Beauchamp, chief market analyst at online trading platform IG, said a quiet day has seen stocks make further headway.
“The rally in equities over the past week will have many scratching their heads, wondering why markets have been able to rebound despite the lack of news. But it is because there is so little in the way of big news that markets have recovered. It has allowed investors to focus on valuations, and put the rate hikes of the ECB and the Fed’s hawkish commentary behind them,” Beauchamp said in a statement.
However, Beauchamp said the quiet wouldn’t last.
“The next Fed decision will soon begin to loom large, and it is likely that even a softer CPI reading in the US this week will not deter the FOMC from another bumper rate hike. The broader outlook still remains tough, and it makes sense to expect indices to reverse course in the weeks to come,” he said.
At midday, the major movers included EV manufacturer Lucid Group, up by 5.9% on news the stock had been given a Buy rating by analysts, plus Bristol-Myers Squibb was up by 5.2% and Gilead Sciences rose by 4.5%.
On the downside, Florida fertilizer company Mosaic was down by 6.4%, and biotechnology company Amgen slid by 3.7%.
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Wall Street opened higher on Monday with all eyes looking ahead to tomorrow’s key US inflation data, with the headline CPI figure expected to come in at 8.1%, down from the 8.5% posted in July.
Just after the open, the Dow Jones Industrial Average had added 149 points or 0.5% at 32,302 points, the S&P 500 was up 28 points or 0.7% at 4,096 points, and the Nasdaq Composite had gained 96 points or 0.8% at 12,208 points.
City Index and FOREX.com market analyst Fawad Razaqzada noted that stocks had started the week positively, but this optimism could fade as not much had fundamentally changed with policymakers ramping up hawkish rhetoric amid a plethora of worries including surging inflation, low economic growth, and rising interest rates.
“Given that these worries are still out there, you would have to remain nimble and take extra care as the markets can resume lower at any moment,” he said. “Thus, I am continuing to expect to see a bumpy road in ahead for stocks and other risk assets for the foreseeable future.”
Razaqzada added that there had been some talk of inflation being near the peak and investors betting that price pressures would start to weaken going forward.
“Tomorrow’s publication of US CPI should shed some more light onto this thesis, but one thing is clear: prices have risen more sharply and remained elevated for much longer than many people had expected,” he said.
US stocks were expected to open the new week higher amid expectations that US inflation data, due on Tuesday, will bring a much hoped-for softening, showing that the Federal Reserve’s spate of aggressive interest rate hikes is starting to work.
Futures for the Dow Jones Industrial Average were trading up 0.4% pre-market, while those for the broader S&P 500 index were up 0.5%, and futures for the tech-laden Nasdaq-100 were also 0.5% higher.
“I believe that the latest market optimism could be explained by hope to see a second month of softening inflation in the US at this week’s CPI release,” noted Ipek Ozkardeskaya senior analyst at Swissquote Bank.
On Tuesday, the headline US CPI figure is expected to have eased to 8.1% in August from 8.5% in July and down from the 9.1% peak printed the month before that, she said.
“If the data is soft enough, or ideally softer than expected, the equities will likely continue pushing higher this week as well. If, however, the data is not as soft as expected, or worse, if we see a higher figure than last month’s read, then last week’s gains in equities will likely be quickly given back,” she said.
“There are signs that inflation in the US may have further eased last month. We saw softer Chinese producer prices which generally explains a part of US inflation, softer rents, softer used car prices and softer gasoline,” added Ozkardeskaya.
US stocks enjoyed gains in the latter part of last week despite the hawkish noises from US rate-setters who said that the focus will be on taming inflation. Investors appeared to have taken the hawkishness in stride and sought out bargains, especially amid market turbulence elsewhere around the globe.
As things stand, the probability of seeing a 75-basis point rate hike from the Fed at its September meeting is at around 90%, thanks to the hawkish tone struck by rate-setters, said Ozkardeskaya.
“So, there is not much left to be priced there. And whatever happens this week, we know that the Fed is willing to deliver another 75 basis points this month. So, no one is playing on this month anymore,” she added.
The inflation data for August will, however, set the tone for interest rate expectations further out.
Contact the author at jon.hopkins@proactiveinvestors.com
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