Market Hopes Soar: SPY, QQQ Rally in Response to Rate Cut Speculation
SP 500 ETF ($SPY) and Nasdaq 100 ETF ($QQQ) defy negative jobs data, soaring on the back of expected rate cuts and renewed optimism.
In an unexpected twist, both the S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ) closed their Wednesday trading session with gains, rising amid renewed optimism over potential rate cuts. This surge comes despite the release of discouraging jobs data earlier in the day, weaving a complex narrative of hope and caution.
The JOLTS Data: A Jolt to the Economy?
The labor market faced another setback as the Job Openings and Labor Turnover Survey (JOLTS) reported an increase in layoffs and a drop in job openings. For the first time since April 2021, the number of job openings fell below the number of unemployed, setting a 0.99 ratio. Such statistics draw a vivid picture of a stirring yet fragile economy.
The Rate Cut Anticipation: A Propelling Force
CME’s FedWatch tool shows a substantial rise in the expectation of a 25-bps rate cut at the upcoming Federal Open Market Committee (FOMC) meeting, now reaching a striking 95.4%. Lower borrowing costs could potentially ignite hiring and bolster economic activities. Fed Governor Christopher Waller advocates for rate cuts, underscoring the need for swift action.
An Inflated Target: HSBC’s Optimistic Outlook
While grappling with job woes, the economic landscape finds a sprinkle of positivity through HSBC’s ambitious revisions in its 2025 S&P 500 price target, raising it to 6,500. The bank bases its optimism on solid second-quarter earnings and possible advantages arising from advanced technologies like AI.
Trade Tensions: Unraveling Agreements?
Amidst the market’s dynamism, trade disruptions remain lurking in the shadows. President Trump’s recent Supreme Court appeal, crucial to avoid unwinding trade deals, adds another layer of uncertainty. Tariffs hang in the balance as the appeals court granted time until October 14 for a potential legal pivot.
A Mixed Bag: Where Do We Stand?
The interplay of potential rate cuts against a backdrop of unsettling jobs data and ambiguous trade policies casts a bittersweet tone over the market. However, as HSBC underscores, technological productivity gains and geopolitical improvements could reignite a resilient spirit.
According to TipRanks, the overall enthusiasm surrounding expected rate cuts made a noteworthy impact as both SPY and QQQ demonstrated upward momentum, closing 0.51% and 0.79% higher, respectively. Despite mounting challenges, the dream of an invigorated economy keeps shimmering on the horizon.