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Stocks rebounded as beaten-down chipmakers rallied, buoyed by favorable economic data that strengthened expectations for a U.S. Federal Reserve rate cut in September. Nvidia Corp. (NASDAQ:NVDA) surged 10% after being named the top U.S. chip stock pick by Morgan Stanley, and Advanced Micro Devices Inc. also saw a significant rise. The U.S. Treasury kept its quarterly issuance of long-term debt unchanged, maintaining guidance for stable issuance in the near term.
U.S. economic data showed a slowdown in labour cost growth and wage increases, with a reduction in job additions and a rise in pending home sales. This has led to speculation that the Fed might signal a rate cut in its upcoming meeting. Thierry Wizman of Macquarie emphasized the Fed's need to balance its signal to avoid alarming traders about potential economic weakness or appearing too cautious.
The S&P 500 rose by 1.5%, the Nasdaq 100 climbed 2.6%, and the Russell 2000 gained 0.5%. Meta Platforms Inc. is set to report earnings, and there is hope it will perform better than Microsoft Corp. and Alphabet Inc. in demonstrating the value of AI spending. Mastercard Inc. and Boeing Co. saw gains following strong earnings and new executive appointments, respectively.
Treasury yields fell to 4.11%, and the Bloomberg Dollar Spot Index dropped 0.4%. Oil prices surged due to geopolitical tensions following the death of a Hamas leader, and the yen strengthened after the Bank of Japan raised interest rates and reduced bond purchases.
According to a survey by 22V Research, 75% of respondents believe the Fed will initiate a rate cut due to a soft landing and a favorable inflation trajectory. However, concerns about seasonal stock market performance in August and September persist, as these months historically show average losses for the S&P 500 Index. Solita Marcelli of UBS Global Wealth Management remains positive on U.S. equities, highlighting opportunities in AI and other growth sectors.
