S&P 500: Rally Pauses but Bullish Outlook Holds Strong with Fed Cuts and China Stimulus

Stock Futures Dip as Markets Eye September Gains Amid Mixed Global Sentiment

Stock futures were lower on Wednesday as traders digested recent record highs in U.S. markets while remaining cautious about global economic developments. The S&P 500 and Dow Jones Industrial Average both closed at new records on Tuesday, gaining 0.25% and 0.20%, respectively. The Nasdaq Composite posted a 0.56% increase and is now less than 4% away from its all-time high. Despite bullish momentum, concerns about an economic slowdown persist, especially after last week’s Federal Reserve rate cut.

At 12:21 GMT, Dow Futures are trading 42584.00, down 13.00 or -0.03%. S&P 500 Index Futures are at 5787.75, down 4.25 or -0.07% and Nasdaq Futures are trading 20131.25, down 36.50 or -0.18%.

Impact of Federal Reserve Policy

The Fed’s recent interest rate cuts have shifted focus to economic performance, with investors closely watching labor market data. While the move has supported equities, Lauren Goodwin, chief market strategist at New York Life Investments, warned that rising unemployment or declining earnings could derail the rally. Bank of America suggested that further rate cuts may be needed to offset labor market weaknesses, which could provide additional support to both the economy and market sentiment.

Homebuilders React to Earnings Misses

Shares of KB Home dropped 6% in after-hours trading after reporting weaker-than-expected third-quarter earnings. The company posted earnings of $2.04 per share, missing the $2.06 forecast. A decline in the company’s gross margin raised concerns about the broader housing market, especially as rising interest rates impact homebuilders. Investors are closely watching how the Federal Reserve’s rate cuts might influence mortgage rates, with new home sales data for August expected to drive sentiment.

Chinese Stimulus Drives Metals Rally

The People’s Bank of China’s (PBOC) aggressive monetary easing is driving a rally in metals and mining stocks. On Tuesday, the SPDR S&P Metals & Mining ETF (XME) jumped 4.22%, its best performance of 2024, as companies like MP Materials surged over 12%. The PBOC’s policy is expected to increase demand for raw materials like copper and coal, essential for China’s infrastructure projects. Precious metals also surged, with gold hitting new highs and silver rising 4.56%.

Google Files EU Antitrust Complaint Against Microsoft

Google has filed an antitrust complaint with the European Commission, accusing Microsoft of using restrictive cloud licensing practices to dominate the market. Google alleges these practices make it difficult for customers to switch from Microsoft’s Azure cloud services to competitors like Google Cloud. The case could significantly impact competition in Europe’s cloud services sector.Top of Form

Market Outlook: Bullish Sentiment Driven by Stimulus and Fed Expectations

The PBOC’s stimulus is fueling bullish sentiment in metals and mining stocks, while also boosting risk assets in emerging markets. Investors are closely watching upcoming home sales and jobless claims data, which could influence expectations for further Federal Reserve rate cuts. While optimism is growing around China’s recovery, the Fed’s monetary policy remains critical in determining market direction, as additional easing could support demand for commodities and sustain market gains in the weeks ahead.