The stock market saw a rally, fueled by a notable rise in Tesla shares, as investors closely monitor upcoming inflation figures, which offer insight into the path of interest rates from the US Federal Reserve.
Tesla advances: Morgan Stanley’s bullish call
Tesla witnessed a sharp rise of 5.8% after Morgan Stanley upgraded its rating from “equal weight” to “overweight.” The move was attributed to Tesla’s innovative Dojo supercomputer, with analysts suggesting it could potentially raise the company’s market value by nearly $600 billion.
Megacaps in green: Alphabet, Microsoft and Amazon lead
Notable tech giants such as Alphabet, Microsoft and Amazon also saw gains, ranging between 0.4% and 1.1%, contributing to the positive momentum.
Consumer Discretionary Stocks Lead S&P 500 Gains
Consumer discretionary stocks within the S&P 500 took the lead, showing an impressive 1.6% gain, driving the overall positive performance.
Awaiting key economic indicators: consumer and producer prices, retail sales data
Market participants are eagerly anticipating crucial economic data, including consumer and producer prices, as well as retail sales figures due to be released later in the week.
Inflation Outlook: Balancing Act for the US Economy
Wednesday’s consumer price data will serve as a litmus test for whether the U.S. economy is headed toward a “soft landing.” This scenario would potentially provide the Federal Reserve the opportunity to curb inflation without causing significant disruptions to economic growth.
Expert Perspective: Hugh Anderson Screenings
According to Hugh Anderson, CEO of HighTower Advisors, “Inflation numbers should be expected to be at least stable, if not higher, and most likely slightly higher compared to the continued decline we have seen since last year… I expect at least one more increase, but this is at best. There will certainly be no cuts, and I don’t expect to see cuts for quite some time until we see a dramatic drop in the employment”.
Market sentiment and rate expectations
Traders currently estimate a 93% probability that the central bank will keep interest rates at their current levels at the September meeting. The odds of a pause in November are almost 61%, according to the CME FedWatch tool.
Treasury Yields and the Federal Reserve Lockup Period
On Monday, Treasury yields saw a marginal rebound, with the 2-year bond, considered a key indicator of short-term interest rate expectations, hovering around 4.9948%. Federal Reserve officials have entered a “blackout period,” during which they typically refrain from making public statements, until the policy decision is announced on September 20.
Market indices at a glance
At 9:47 a.m. ET, the Dow Jones Industrial Average showed a gain of 156.55 points (0.45%) to 34,733.14, the S&P 500 was up 19.46 points (0.44%) to 4,476.95 and the Nasdaq Composite was up 71.42 points (0.52%) to 13,832.94.
Other notable movements in the market
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Qualcomm rose 3.6% after signing a new deal with Apple to supply 5G chips until at least 2026.
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Hostess Brands rose 18.8% following JM Smucker’s announcement of a $5.6 billion acquisition deal.
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Meta Platforms saw a 1.8% rise after reports emerged that the company was working on a more powerful artificial intelligence system.
Market performance metrics
Issues that rose exceeded those that fell by a ratio of 3.46 to 1 on the New York Stock Exchange and 2.01 to 1 on the Nasdaq. The S&P index recorded 10 new 52-week highs and five new lows, while the Nasdaq recorded 14 new highs and 46 new lows.
Also read: Asian Stock Markets: Mixed Performance Amid US Inflation, China Economic Data