Stock market soars as interest rate reductions approach: Today's Stock Market Report (Dow gains 617 points)
In a significant development, Simon Dangoor, the head of Fixed Income Macro strategies at Goldman Sachs Asset Management, has predicted that the Federal Reserve is likely to cut interest rates next week. This decision is based on weak labor market data and the potential for further easing in October. It's important to note that no publicly available information specifies who informed Dangoor about the Fed's intentions in October.
Inflation data for August showed a mixed picture. The Consumer Price Index (CPI) increased by 0.4% month over month, higher than the 0.2% rise seen in July and the 0.3% increase economists expected. This increase resulted in an annual inflation rate of 2.9%, a quicker pace than the month prior and the largest annual increase since January. However, the core CPI, which excludes volatile food and energy prices, remained stable, rising 0.3% month over month and 3.1% year over year, matching the figures from the July CPI report and economists' forecasts.
The labor market also showed some signs of strain, with the Labor Department reporting that weekly jobless claims climbed by 27,000 last week to a seasonally adjusted 263,000, which is the highest level since October 2021. Bill Adams, chief economist at Comerica Bank, has suggested that this week's initial claims update should be taken with a larger-than-usual grain of salt due to its volatile nature and the coincidence with the Labor Day holiday and the start of the school year.
Despite these challenges, the stock market ended August on a high note. The Dow Jones Industrial Average finished up 1.4% at 46,108, the S&P 500 added 0.9% to 6,587, and the Nasdaq Composite gained 0.7% to 22,043, all ending at new record closing highs.
In the tech sector, Micron Technology's (MU) shares surged 7.6% after analysts at Citi reiterated their Buy rating on the memory chipmaker and raised their price target to $175 from $150. Citi thinks Micron has more room to run thanks to increased demand for its dynamic random-access memory (DRAM) chips, particularly from the data center end market. Micron is expected to provide strong guidance when it makes an appearance on the earnings calendar later this month on 'higher DRAM and NAND sales and pricing.'
Amazon.com (AMZN) was also in the spotlight, with the company preparing to more than double its reach - to 2,300 cities by year's end - by retrofitting existing fulfillment centers and adding new ones that have cold storage capabilities. Morgan Stanley analyst Brian Nowak sees Amazon's push into the roughly $600 billion fresh grocery market unlocking durably faster growth. In recognition of this potential, Amazon.com was added to Nowak's 'top pick' list.
As we move forward, it will be interesting to see how these developments unfold and how they impact the economy and the stock market. The Federal Reserve's decision on interest rates next week is likely to be a key event to watch.
){kind=link}