Fed Euphoria Keeps US Stocks On Track For More Gains: Analyst Says New Breakout Coming Soon

Benzinga - by Shanthi Rexaline, Benzinga Editor.

U.S. stocks appear on track to continue their record run on Thursday, with stock futures grinding solidly higher. Despite the Fed deemphasizing incoming data at its latest meeting, traders could sift through a few key data on economic activity, the manufacturing, and the housing sector. A few key earnings due after the market close will also be on investors’ radar. The broadening in the rally in the wake of rate cut hopes could bode well for the market, insulating against any pullback in overvalued tech stocks.

Cues From Previous Session:

The March Fed decision and Jerome Powell’s comments proved to be an elixir for the market on Wednesday. After bidding time until the announcement of the rate decision, stocks rallied strongly, with the three major averages closing fresh record highs. Small-caps went on to outperform their bigger counterparts.

The S&P 500 scripted highs both on an intraday basis and on a closing bias, while the Nasdaq Composite and Dow Industrials could not beat their previous intraday record despite a post-Fed decision surge.

All S&P sectors, save energy and defensive healthcare stocks, closed higher for the day, with the gains led by consumer discretionary, communication services, financial, industrial, IT, and material stocks.

“I think we dodged a bullet,” said fund manager Louis Navellier. “The FOMC statement was still very dovish. The Fed dot plot that came out was pretty close to being split between two to three rate cuts, and a small majority that wants to have three rate cuts this year,” he said.

“The only major change was next year, 2025, the Fed is only expecting three rate cuts versus the three to four cuts they were expecting before.”

The Fed may have been swayed by European Central Bank President Christine Lagarde, who made it clear that they were ready to start cutting rates in June, Navellier said.

Analyst Color:

“The party is going to persist,” said Navellier. The fund manager expects the Fed to cut rates no later than June. “What will be happening in the upcoming months is that most central banks will commence to cut key interest rates in unison,” he said.

Carson Group’s Ryan Detrick pointed to data that should bode well for the market rally. “In healthy bull markets, you see high beta leading. A new breakout could be coming soon,” he said.

High beta vs low volatility.

In healthy bull markets you see high beta leading. A new breakout could be coming soon. pic.twitter.com/gLjTI1pJC4

— Ryan Detrick, CMT (@RyanDetrick) March 21, 2024

Futures Performance On Thursday ( as of 7 a.m. EDT)

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.37% to $522.40, and the Invesco QQQ ETF (NASDAQ:QQQ) climbed a steeper 0.75% to $447.08, according to Benzinga Pro data.

Upcoming Economic Data:

The Labor Department is scheduled to release its weekly jobless claims report at 8:30 a.m. EDT. The number of individuals claiming unemployment benefits may have increased from 209,000 in the week ended March 9 to 213,000 in the week ended March 16.

The Philadelphia Federal Reserve will release the results of its March manufacturing activity survey at 8:30 a.m. EDT. The diffusion index of business activity is expected to come in at -5, almost flat with February’s -5.2, suggesting continued contraction.

The S&P Global is due to release its flash manufacturing and service sector purchasing managers’ indices at 9:45 a.m. EDT. The manufacturing PMI may have edged down from February’s 52.2 to 51.8 in March and the service sector PMI is expected to come in at 52 in March, suggesting a slightly slower expansion than the one suggested by the February reading of 52.5.

The Conference Board is scheduled to release its leading economic index for February at 10 a.m. EDT. The index is expected to continue its month-over-month declining streak, slipping 0.1% in February compared to January’s 0.4% drop.

The National Association of Realtors is due to release its existing home sales report for February, also at 10 a.m. EDT. Economists, on average, expect existing home sales to come in at a seasonally adjusted annual rate of 3.95 million units compared to January’s rate of 4 million units.

Fed Vice Chair for Supervision Michael Barr will speak at 12 p.m. EDT.

See also: How To Trade Futures

Stocks In Focus:

• Micron Technology, Inc. (NASDAQ:MU) rallied nearly 18% in premarket trading following the memory chipmaker’s earnings announcement.
• Other stocks moving on earnings are Steelcase Inc. (NYSE:SCS) (down over 8%) and Five Below, Inc. (NASDAQ:FIVE) (down about 13%).
• Accenture plc (NYSE:ACN), Darden Restaurants, Inc. (NYSE:DRI), Winnebago Industries, Inc. (NYSE:WGO) and Shoe Carnival, Inc. (NASDAQ:SCVL) are among the notable companies due to report their quarterly results before the market open.
• Those reporting after the close include FedEx Corporation (NYSE:FDX), Lululemon Athletica Inc. (NASDAQ:LULU), NIKE, Inc. (NYSE:NKE) and Worthington Steel, Inc. (NYSE:WS).

Crude oil futures edged down 0.21% to $81.10 nearly $1 after sliding over 2% in the previous session. Gold futures have reversed course and traded at a fresh record. The 10-year Treasury bond yield edged down to 4.231%. Bitcoin (CRYPTO: BTC) selling stalled and the apex crypto gained over 6% over the past 24 hours.

Asian stocks rallied across the board, with the Chinese market bucking the uptrend amid a consolidation move following its recent gains. Japan’s Nikkei 225 average closed at a fresh record. European stocks were higher, although they came off their early highs.

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