Stocks are breaking out as the Federal Reserve moves to support the economy instead of fighting inflation.
The S&P 500 rose 1.4 percent between Friday, September 13, and Friday, September 20. The index closed above 5,700 for the first time ever, while the Dow Jones Industrial Average set a new record above 42,000. The Nasdaq-100 also climbed but remains below its peaks in July.
The Fed lowered interest rates by 50 basis points on Wednesday and projected another 50 basis points of easing this year. The cut was bigger than expected a few weeks ago, reflecting a new concern with slowing employment. Chairman Jerome Powell emphasized “maintaining our economy’s strength by supporting maximum employment” more than slowing inflation. In previous meetings, he was more worried about prices.
| Biggest Gainers in the S&P 500 Last Week | |
| Constellation Energy (CEG) | +30% |
| Vistra (VST) | +26% |
| CrowdStrike (CRWD) | +16% |
| Airbnb (ABNB) | +11% |
| Intel (INTC) | +11% |
Despite that concern, most economic numbers were strong. Retail sales beat estimates for the third straight month. Initial jobless claims fell more than expected to their lowest level in four months. Housing starts and building permits also surprised to the upside. Industrial production was triple the forecast amount.
Wall Street grew more bullish amid the easier monetary policy and strong economic data. BMO raised its yearend target on the S&P 500 to 6,100 from 5,600. Citi reported that family offices are the most positive in years and want to move cash into risk assets. Bank of America reported global fund managers got more bullish this month for the first time since June. A separate study by S&P Global found that institutional investors were net buyers of stocks in August for the first time since December.
Safe Havens Slide
The biggest gainers last week were “risk-on” sectors like energy, financials and communications. Safe-havens like real estate, consumer staples and health care lagged. That’s potentially noteworthy because safe havens have largely outperformed during the summer as megacap growth stocks lagged.
Meta Platforms (META), for instance, jumped 7 percent to a new all-time high. Excitement about AI and spatial computing helped fuel the move before the company’s Meta Connect event on Wednesday.
CrowdStrike (CWRD) had its biggest weekly gain in over three years after highlighting new cybersecurity services. Intel (INTC) rebounded after announcing an AI-chip contract with Amazon.com (AMZN) and a reorganization to its foundry business. However, INTC is still the worst-performing member of the S&P 500 this year.
Constellation Energy (CEG) had its biggest weekly gain ever after agreeing to sell Microsoft (MSFT) electricity for datacenters. The utility company will reopen a nuclear plant at Three Mile Island in Pennsylvania to fulfill the order, the latest sign of how AI is driving growth in the U.S. economy. Vistra (VST), another nuclear generator, also surged.
Nike, PayPal
VST is now the top-performing member of the S&P 500 this year with a gain of 180 percent. Nvidia (NVDA) and CEG follow with gains of 134 percent and 118 percent, respectively, according to TradeStation data.
Here were some other noteworthy movers:
- Nike (NKE) rallied 9.5 percent after naming Elliott Hill as CEO. Hill was a successful executive at the shoemaker who had retired in 2020. The move spurred hopes of a turnaround.
- PayPal (PYPL) had its biggest weekly gain in almost a year after striking a payment partnership with AMZN.
- Gold hit a new high above $2,600 per ounce as interest rates fell.
Energy stocks were the top sector overall, rebounding from weeks of underperformance. Banks, airlines and metals were also strong.
Charting the Market
Last week established the S&P 500 above the psychologically important 5,700 level. The index also cleared its previous high from mid-July.
There seem to be few potentially negative patterns in the price action. Short-term indicators like MACD and the nine-day rate of change are climbing. Faster moving averages are above slower MAs. Some technicians could also interpret this month’s higher low as part of a bullish ascending triangle.
Other charts could support a bullish stance. Cboe’s volatility index (VIX), for example, has been fading. The yield on the 10-year Treasury note, which mostly moves in the opposite direction of stocks, has also been making lower highs and lower lows.
The Week Ahead
This is the last full week of September (and the third quarter). If the month closes in the green, it would be the first positive September since 2019. The calendar is relatively quiet.
| Biggest Decliners in the S&P 500 Last Week | |
| FedEx (FDX) | -11% |
| AJ Gallagher (AJG) | -7.2% |
| Walgreen Boots Alliance (WBA) | -5.4% |
| Qorvo (QRVO) | -5% |
| Cencora (COR) | -4.9% |
Fed officials Raphael Bostic and Austan Goolsbee make speeches today.
Tomorrow brings consumer confidence and earnings from AutoZone (AZO).
Crude oil inventories and new home sales are on Wednesday. Micron Technology (MU) announces quarterly results.
Thursday features a speech by the Fed’s Powell, initial jobless claims and durable goods orders. Costco (COST) reports earnings.
The personal consumptions expenditures (PCE) inflation report is on Friday. It may have less impact than in previous months because the Fed has signaled its policy intentions. Personal income and spending are also due.
