S&P 500 - uncertainty apparent
US stock index futures were all modestly higher in early trade, but began to turn lower as the session progressed. Yesterday saw another mixed session yesterday which saw gains for the S&P 500 and NASDAQ, and small losses for the Dow and Russell 2000. This is entirely consistent with the sharp recovery in NVIDIA, a constituent of both the NASDAQ and S&P. Yesterday’s rally followed a bout of hefty profit taking since last Thursday. Yesterday NVIDIA gained 9% and was up another 2% first thing this morning. So far, investors are viewing NVIDIA’s sell-off as an opportunity to build up additional exposure. But the stock is still around 8% below the high hit last week. Let’s see if investors remain so convinced of the chip designer’s future that they drive it up to new highs. If so, then it will restore the company’s status as the stock market’s bullish bellwether. If not, then further weakness could easily sour sentiment in general, even if there is perceived value outside the tech leaders. A glance at the charts of the major US stock indices suggests a period of uncertainty and indecision as far as investors are concerned. On one hand, the market appears relatively relaxed with the prospect of two, or maybe even just one, 25 basis point rate cut from the Federal Reserve this year. Instead, they’ve transferred their hopes of much looser monetary policy to come in 2025. There’s nothing particularly daunting on the horizon, so there’s no reason to reduce market exposure. On the other hand, inflation remains sticky, recent economic data releases suggest that the economy is slowing, next year’s rate cut predictions could get rolled back as quickly as this year’s and there’s a huge amount of money concentrated into a small number of overvalued corporations. That’s before considering the shocking US debt situation and the Presidential Election in November. Of course, this is what makes a market. So, while things are relatively quiet on the surface, there’s quite a bit bubbling underneath.
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