US market closed in mixed territory on Friday as investors digested the recent Federal Reserve interest rate cut. While the Dow Jones Industrial Average continued its upward trend, the S&P 500 and Nasdaq Composite saw minor declines.
Despite Friday’s muted performance, all major indices posted weekly gains, largely driven by Thursday’s rally following the Fed’s announcement. Investors welcomed the central bank’s decision to cut interest rates, which was aimed at boosting the economy, especially after the release of positive jobless claims data.
Market Optimism Fades as Economic Concerns Resurface
However, the market’s optimism faded on Friday as concerns about future economic risks resurfaced. Market participants remained uncertain about the Fed’s ability to achieve a “soft landing,” and traders continued to anticipate more aggressive interest rate cuts than what the central bank had projected.
Adding to the uncertainty, a prominent Bank of America strategist, Michael Hartnett, warned of a potential stock market bubble. He suggested that current valuations might be pricing in overly optimistic levels of policy easing and earnings growth, which could leadinvestors to chase unsustainable returns.
Corporate News: Intel Rises, Qualcomm and FedEx Slip
In corporate news, Intel shares surged after reports indicated that Qualcomm had approached the chipmaker about a potential takeover. However, Qualcomm’s stock declined following the news. Meanwhile, FedEx shares fell after the company reported a significant drop in profit, which missed analysts’ expectations.
Weekly Market Performance Recap
For the week:
S&P 500: +1.4%
Nasdaq Composite: +1.5%
Dow Jones: +1.6%
Friday’s Closing Levels:
| Index | Close | Change | % Change |
| Dow Jones | 42,063.36 | +38.17 | +0.09% |
| S&P 500 | 5,702.55 | -11.09 | -0.19% |
| Nasdaq Composite | 17,948.32 | -65.66 | -0.36% |
| US 10-Year Yield | 3.741% | ||
| VIX | 16.51 | -0.18 | -1.10% |
Analysis: Powell’s Move and Market Sentiment
It seems that Fed Chair Jerome Powell may have caved to the market pressures, or perhaps politics played a role. A 50 basis points cut could certainly help the democrats politically.
But the bigger question remains: Is Powell trying to catch up after falling behind the curve, or does he know something that the market doesn’t?
Cutting rates by 50 basis points at a market high is not unprecedented but it is uncommon. Does Powell foresee a potential recession and is trying to prevent it, or is he simply buying some insurance against future risk? Whatever the reason, the market has reacted positively.
Triple Witching and Market Activity
Friday was also a “triple witching” day, where stock index futures, stock options, and stock index options all expired at the same time. As a result, Friday’s trading activity may not provide a clear indication of market direction, as traders were likely managing their position ahead of the next expiry.
However, it was noted that there were some large dark pool trades at the highs, Suggesting profit-taking rather than new short positions. Next week will likely reveal whether this marks the start of more profit-taking or an attempt to push for new market highs.
Outlook: Bullish Trend with Caution
The current trend remains bullish, and momentum is still strong. If we see any retracement, it is likely to be short-lived as dip buyers step in. The market appears convinced that the only direction is up. However, it is worth noting that complacency can lead to mistakes. Historically, market crashes often happen when sentiment is at its most comfortable.
Source: CBOE, Bloomberg
This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable US bank exceeding 20 years.
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This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it.
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