Dow Jones, Nasdaq, S&P 500 weekly preview: New economic data could boost stocks

Investing.com -- The Dow Jones Industrial Average edged higher on Friday, setting a new record to close out a strong week driven by the Federal Reserve's first big interest rate cut in four years.

The 30-stock Dow added 38.17 points, or 0.09%, to close at 42,063.36, marking a new all-time high. The S&P 500 slipped 0.19% to 5,702.55, while the Nasdaq Composite fell 0.36% to 17,948.32. Thursday saw the Dow surpass 42,000 for the first time, and the S&P 500 broke through the 5,700 level.

All three major indices ended the week in positive territory. The S&P 500 climbed 1.36%, recording gains in five of the past six weeks and rising more than 19% so far in 2024. The Dow increased by 1.62%, and the Nasdaq added 1.49%.

The market's moves followed the Federal Reserve's decision on Wednesday to cut interest rates by a substantial half percentage point, its first reduction since 2020.

This week's Fedspeak could provide more insight into last Wednesday's unexpected decision.

On Thursday, Fed leaders are set to speak at the 10th annual U.S. Treasury Market Conference.

Fed Chair Powell will deliver pre-recorded opening remarks, followed by speeches from New York Fed President Williams and Vice Chair for Supervision Barr.

“Comments from these officials will be parsed for clues on the direction of travel for regulatory policy, as well as any update on how the Fed is viewing progress on balance sheet reduction,” Deutsche Bank strategists said in a note.

In terms of economic data, the key reports this week include Thursday's final reading of Q2 real GDP, expected to match the preliminary figure of 3.0%, and Friday’s personal income (+0.3% forecast vs. +0.3% prior) and consumption (+0.3% vs. +0.5%) figures for August. The core PCE inflation data will also be released, with a forecast of +0.18% compared to the previous +0.16%.

“Stronger-than-expected economic data would be a boon for stocks. Stocks in the S&P 493 should benefit from looser monetary policy and solid economic growth,” Yardeni Research wrote in a note on Monday.

“Bondholders may be less enthused, as long-term Treasury yields likely continue to rise in this recession-less scenario,” it added. This week’s earnings focus: Micron and Costco

As September draws to a close, the final week brings a relatively light earnings schedule, though a few highly anticipated reports are imminent.

Most notably, semiconductor giant Micron Technology (NASDAQ:MU ) and retail powerhouse Costco Wholesale (NASDAQ:COST ) are set to release their financial results.

Micron, one of Nvidia’s key suppliers of AI memory chips, will report its earnings on Wednesday, with analysts anticipating a 90% year-over-year revenue jump, fueled by growing demand for memory chips in artificial intelligence.

While some Wall Street analysts remain bullish on the chipmaker, others have recently cut their ratings on the stock and trimmed price targets, mainly due to elevated inventory levels and signs of a slowing recovery in the memory market.

Moreover, earnings updates from companies like Accenture (NYSE:ACN ), BlackBerry (NYSE:BB ), and AutoZone (NYSE:AZO ) will also be in focus. What analysts are saying about US stocks

Oppenheimer:“We continue to expect that small and midcap stocks could begin to experience more sustainable rallies now that the Fed has begun to cut its benchmark rate. While we favor equities over fixed income, we continue to find fixed income to be complementary to equities and other asset classes in diversified portfolios when duration is matched to investor goals, objectives, and tolerances to risk. Our target price for the S&P 500 this year remains 5,900.”

Bank of America: “We are now past what was the most uncertain Fed day at least since 2015, with the best-case scenario of strong retail sales and a 50bp cut. Absent a big surprise in PCE, we see no major macro data releases this week that could spook the market. Historically, quiet macro weeks have been the best weeks for stocks (median return +0.61% vs. a typical +0.38%.”

BTIG: “As we discussed on Friday, the imminent false breakout on FOMC didn’t materialize. We are still in a seasonal weak window, and can expect some digestion, but we have to respect a new high in the SPX, along with equal-weight S&P 500. The S&P's cumulative advance-decline line also continues to make new highs ahead of price. While this doesn’t preclude some short-term weakness, it typically bodes well for the medium-term. High beta vs. low vol has seen a nice comeback, but is back to a key resistance level. Clearing that would be another bullish shift.”

Morgan Stanley: “The Fed delivered on what we thought was the best short-term case for stocks. Tactically, we move to neutral on defensives vs. cyclicals as markets await more clarity on the labor data. We continue to recommend a large cap, quality bias.”

Source: Investing.com