The Dow Jones has rallied after a poor summer performance. Despite inflation worries, some stocks have helped it pick up. This article discusses the stock market and its impact on traders and investors.
The summer months are typically the poorest for the Dow Jones and other global markets. However, this week it began an unexpected rally due to a few key stocks. This was despite inflationary fears in the US. Read on as we discuss the state of the market this week and how it will impact traders.
The Stock Market Rally
At the start of September, the S&P saw its worst week in a year and a half. Before closing on Friday, 1% of the Dow Jones Industrial Average was sold, 1.7% of the S&P 500 was taken off, and the NASDAQ lost 2.6%.
After the opening bell on Monday, September 9th, the Dow Jones Industrial Average rallied 0.9%. The S&P 500 rose 1%, and the NASDAQ rose 1.2%.
Several factors assisted this. Oil rose to $68.25 a barrel with West Texas Intermediate Futures. Corporate earnings were up, job claims were down, retail sales were strong, and GDP looked promising despite a slowing in the job growth market.
A few key reports arrive in mid-September that may have a marked impact on the stock market. The consumer price index for August will arrive in the middle of the month, followed by the producer price index. While data on earnings have cooled, some major companies will announce potential profits this week. They include Oracle, Adobe, GameStop, and Kroeger.
Is the Market Set for a Major Rally?
Many people currently in stock trading are predicting a major rally based on historical trends. The summer months are always downtime for global stock markets. This year’s slow months have been compounded by a looming recession in the US and instability over the yen’s future.
October is generally when some of the largest rallies in the stock market begin, signalling a shift where there is a bounceback from sell-offs. This means it will be a busy month for day traders, but those looking for long-term position trading may find it a perfect time to open new investments, looking for medium—to long-term gains.
Since the Second World War, there have been 61 rallies of 10% or more in October. At the end of the three-month quarter, the Christmas rally is also due to stocks rising due to the festive season when lower trading volumes and less news push stocks up.
Other voices are less optimistic, and fear of a recession is still looming over the US and its markets. Andrew Hollenhorst, the chief US economist, has warned that payroll data shows a recession is coming.
Stocks to Watch
Several key stocks have shown promise this week and could be worth watching for those looking for position trading options.
Apple lost 0.5%, but this could be an astute time to open positions. It will reveal the new iPhone 16 series very soon, which could push it upwards. It is expected to include an advanced new AI system. A host of other new products will be announced. Others in the technology field, Nvidia and Tesla, managed to make gains of 2.7% and 3.4%, respectively.
World Markets
This Wall Street rally has boosted shares across the globe, particularly in the Asian markets, which have been struggling. By Tuesday, most had regained losses and were trading higher. All eyes are now turning to the data on inflation from later in the week.
The United States Federal Reserve has used high interest rates to keep inflation down. They have announced that it is time to lower interest rates, and the official announcement is expected to occur in September. This will help the jobs market and could divert the country from the long-feared recession many believe it is headed for.
When interest rates are high, people tend to stick to tried, trusted, secure investments. When they are lowered, people will be more willing to invest in perceived riskier asset classes. This has been seen in a market leader like Nvidia making gains this week despite some of their forecasts not being as solid as many would have hoped.
The rally is very positive, particularly considering its impact on the Asian markets. Lowering interest rates can keep inflation under control, and the US economy could see a light at the end of the tunnel. This will undoubtedly buoy stocks and shares across the board. Yet if company profits and some reports look gloomy, the resulting fallout could have a major impact on the chance of a recession anyway.
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