Stocks Rally as Investors Welcomed the First US Fed Interest Rate Cut in 4 Years.
Weekly Wrap Up
Despite Wednesday’s volatility, the forecast proved largely accurate as the S&P 500 reached a new all-time high. The main focus this week was the two-day Federal Open Market Committee (FOMC) meeting, which concluded with a 50-basis-point rate cut by the Federal Reserve. For bullish investors, it’s encouraging to see the Fed taking an accommodative stance, and the stock market hitting new highs. However, some traders may be wondering, “What’s next?”
With the S&P 500 trading at a forward P/E ratio of 21, it appears that much of the optimism has already been factored in. For now, the old market sayings, “don’t fight the Fed” and “don’t fight the trend,” might continue to fuel short-term gains. Beyond the Fed’s actions, the economy still shows signs of strength, with FactSet forecasting S&P earnings growth of around 15% by 2025. However, investors must still contend with potentially bearish seasonality in the coming weeks, as well as the uncertainties surrounding the upcoming U.S. presidential election.
Outlook for Next Week
Next week, the earnings and economic calendar is relatively quiet, except for Friday’s PCE report, which may help sustain the recent bullish trend (i.e., in the absence of significant news, the market’s natural direction might be upwards). Although we’re still in a period of bearish seasonality, the technical outlook remains promising (see “Technical Take” section), and today’s minor consolidation after yesterday’s rally seems to support the bullish case.
As long as the S&P 500 stays above July’s previous all-time closing high of 5,667, the trend appears favorable for further gains. Thus, my outlook for next week is “bullish.”
What could change this? A technical break below 5,667 could raise concerns of a false breakout to all-time highs, potentially leading to selling pressure and a down week overall.
Economic:
Tuesday (Sep. 24): Consumer Confidence, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
Wednesday (Sep. 25): EIA Crude Oil Inventories, MBA Mortgage Applications Index, New Home Sales
Thursday (Sep. 26): Continuing Claims, Durable Goods Orders, EIA Natural Gas Inventories, GDP – Third Estimate, Initial Claims, Pending Home Sales
Friday (Sep. 27): Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, Personal Consumption Expenditures Price Index (PCE), Personal Income, Personal Spending, University of Michigan Consumer Sentiment – Final
Earnings:
Monday (Sep. 23): AAR Corp. (AIR)
Tuesday (Sep. 24): AutoZone Inc. (AZO), Thor Industries (THO), KB Home (KBH), Progress Software Corp. (PRGS)
Wednesday (Sep. 25): Cintas Corp. (CTAS), Micron Technology Inc. (MU), Jefferies Financial Group Inc. (JEF)
Thursday (Sep. 26): Accenture PLC (ACN), Jabil Inc. (JBL), CarMax Inc. (KMX), Costco Wholesale Corp. (COST), Vail Resorts Inc. (MTN)
Friday (Sep. 27): No earnings reports
