Stock market on November 24: S&P 500 and NASDAQ bounce back as rate cut hopes rise

[Ben Graham]

On Friday, stock indices closed with modest gains. The S&P 500 rose by 0.98%, while the Nasdaq 100 increased by 0.88%. The Dow Jones Industrial Average jumped by 1.08%.

On Friday, the indices showed a significant correction as traders increased their expectations for an interest rate cut by the Federal Reserve next month. This upward momentum also spread to Asia, with the regional MSCI equity index rising by 0.7%. The Hong Kong index benefited from a 4% rise in shares of Alibaba Group Holding Ltd. after its AI-based app received more than 10 million downloads in the week following its relaunch.

As I mentioned earlier, markets perked up last Friday after New York Federal Reserve President John Williams stated that a rate cut remains a possibility in the short term. Optimism was also bolstered by reports that US authorities are engaging in preliminary talks regarding Nvidia Corp.'s sale of its H200 chips to China. This put an end to the week's volatility on Wall Street, which had been fueled by concerns about high valuations in the AI sector.

AT Global Markets stated that given the movements observed the previous week and the potential for volatility in the coming days, it was understandable that investors did not want to take risks for the sake of positive sentiment.

Treasury bonds also rose on Friday after Williams, considered a close ally of Chair Jerome Powell, indicated that there are opportunities for easing monetary policy in the near term, as risks of declining employment have increased while inflation growth risks have decreased. However, officials still disagree on the appropriateness of a rate cut. Boston Federal Reserve President Susan Collins indicated that she has not yet made a decision regarding further changes to monetary policy.

Ahead of the October monetary policy meeting, investors considered a rate cut in December inevitable. However, following a spike in hawkish sentiment, the odds of this have sharply declined, briefly dropping below 30%. Traders are now pricing in more than a 60% probability of a rate cut.

However, strategists at JPMorgan Chase & Co. hold a slightly different view. In their note, the bank indicated that the Federal Reserve's Open Market Committee will likely refrain from making policy changes at the December meeting due to the limited availability of new data, as the employment reports for October and November, as well as inflation data for those periods, will be released after the Fed meeting. The bank expects a 25 basis point rate cut in January and April.

Regarding the technical picture of the S&P 500, the main task for buyers today will be to overcome the nearest resistance level of $6,638. This would signal growth and open the possibility for a rally to a new level of $6,651. Another priority for bulls will be to maintain control over $6,660, which would strengthen buyer positions. In the event of a downturn amid reduced risk appetite, buyers must assert themselves around $6,627. A break below this level would quickly push the trading instrument back to $6,616 and open the way to $6,603.

The material has been provided by InstaForex Company - www.instaforex.com