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Riding the Bull: Stock Indexes Reach Unprecedented Peaks on Rate Cut Prospects and Economic Soft Landing Hopes

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Market Performance at a Glance

The S&P 500 Index ($SPX) (SPY) is on a roll, rising by +0.48% today. Similarly, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.49%, while the Nasdaq 100 Index ($IUXX) (QQQ) is leading the pack with a +0.90% surge.

Today’s market exuberance builds upon Wednesday’s momentum, as each of these indexes achieved new historic highs. Investors are buoyed by the Federal Reserve’s potential rate cuts later this year, following the FOMC’s inclination towards 75 basis points of interest rate reductions.

Economic Data Revs Up Support

Stock indexes are enjoying a tailwind from robust US economic reports today. Initial jobless claims dropped unexpectedly by -2,000 to 210,000, painting a promising picture of the labor market. Similarly, February’s existing home sales soared by +9.5% to hit a 1-year peak at 4.38 million units.

The industrial sector also showcased strength, with the US March Philadelphia Fed business outlook survey dipping down by just -2.0 points to 3.2, defying the anticipated fall to -2.5. Additionally, the US manufacturing Purchasing Managers’ Index (PMI) for March climbed unexpectedly by +0.3 points to reach a 1.75-year apex at 52.5.

Surprisingly chipper, the US leading indicators in February defied forecasts by rising +0.1% monthly, trumping expectations of a -0.1% dip.

Global Market Odyssey

While the American markets are scaling new heights, global counterparts are experiencing varied fortunes. The Euro Stoxx 50 ascended to a 23-year pinnacle with a +0.90% increase, signaling optimism in the Eurozone. In sharp contrast, China’s Shanghai Composite recoiled by -0.08%, leading to a mixed bag of performances.

Meanwhile, Japan’s Nikkei Stock Index galloped to a fresh record high, closing up by an impressive +2.03% amid soaring investor confidence.

Interest Rates in Focus

June 10-year T-notes (ZNM24) witnessed a dip of -4 ticks this morning, as the 10-year T-note yield rose by +1.4 basis points to 4.287%. Strong US economic reports and hawkish indications for Fed policy triggered this shift. Notably, inflation expectations spiked following a surge in the 10-year breakeven inflation rate to a month-high of 2.367%.

Amidst this sea change in rates, European government bond yields drifted lower today. German bund yields slumped by -2.1 bp to 2.41%, and the UK gilt yields ebbed to a week-low of 3.924%, marking a -3.4 bp decline at 3.982%.

Stock Stars and Laggards

Championing the stock charts today is Micron Technology (MU), soaring by over +14%, thanks to its stellar Q2 performance and bullish Q3 revenue forecasts. Meanwhile, Guess? Inc (GES) is shining bright with a +22% increase following robust Q4 revenue results.

However, the grim reaper has also visited the markets, casting a shadow on companies like Accenture (ACN) and Darden Restaurants (DRI), leading the S&P 500 decline brigade. Apple (AAPL) joined the bleak parade with a -3% downturn amidst legal woes.

Anticipated Earnings Reports

Highlighted among the upcoming earnings releases on March 21, 2024, are Accenture PLC (ACN), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Lululemon Athletica Inc (LULU), and NIKE Inc (NKE).

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