US markets closed the week on a high note, with the Dow Jones Industrial Average reaching a record as investors welcomed signs of cooling inflation. Optimism around further interest rate cuts from the Federal Reserve boosted sentiment, even as the S&P 500 and Nasdaq edged slightly lower due to weakness in tech stocks. Globally, markets responded positively to stimulus measures, particularly in China, where stocks surged dramatically. The week’s data provided a sense of stability, reinforcing hopes for continued economic recovery and market growth.

Key Takeaways:

  • Dow Hits Record High: The Dow Jones Industrial Average surged by 137.89 points, or 0.33%, to close at a record 42,313.00. This marks the third consecutive week of gains for the index, reflecting investor confidence in the US economy as inflation shows signs of cooling. The blue-chip average also reached an all-time intraday high during the session, highlighting the market’s bullish momentum.
  • S&P 500 and Nasdaq Slip: Despite the Dow’s impressive performance, the S&P 500 edged down 0.13% to close at 5,738.17, while the Nasdaq Composite declined 0.39% to 18,119.59. The drop in the Nasdaq was largely driven by a 2% fall in Nvidia shares, which weighed on the tech-heavy index. However, both the S&P 500 and Nasdaq still extended their weekly gains, with the S&P 500 rising 0.6% and the Nasdaq advancing nearly 1% over the week.
  • Inflation Progress Fuels Rate Cut Speculation: The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose by just 0.1% in August, meeting expectations and signalling progress in controlling inflation. Annually, PCE increased by 2.2%, slightly below the forecast of 2.3%. This encouraging data has sparked optimism that the Fed may continue cutting interest rates to support the economy, which could provide further tailwinds for the market.
  • US Consumer Sentiment Improves: The University of Michigan’s consumer sentiment index rose to 70.1 in September, up from 67.9 in August. The improvement exceeded expectations and reflected increased optimism across various demographic groups. A 6% surge in one-year business expectations contributed to the overall rise.
  • European Markets Hit Record Highs: European markets rallied on Friday, with the pan-European Stoxx 600 climbing 0.52% to close at a record high of 528.33 points. France’s CAC 40 gained 0.6% to finish at 7,792, marking its highest level since June and posting strong weekly gains of 3.8%. Germany’s DAX also saw a sharp rise, jumping 243 points, or 1.26%, to close higher for the day. The FTSE 100 increased by 1.10% this week, closing at 8,320.76, as luxury stocks in Europe surged on stimulus news from China.
  • Asian Markets Surge on Chinese Stimulus and Economic Data: Asian markets saw significant gains, led by a massive rally in Chinese stocks. The CSI 300 surged 15.7% for the week, the index’s strongest performance since November 2008, driven by economic stimulus measures from the People’s Bank of China. Hong Kong’s Hang Seng Index also posted an impressive weekly gain of 12.75%, reaching 20,586.94, its highest level since February 2023. In Japan, the Nikkei 225 rose 2.32% to close at 39,829, recovering from earlier losses after the Bank of Japan’s rate decision. Meanwhile, Australia’s S&P/ASX 200 climbed 0.10% to end at 8,212.2, close to its all-time high, while South Korea’s Kospi slipped 0.82% to 2,649.78. The broad-based Topix in Japan gained 0.73% to 2,740.94, supported by easing inflation data from Tokyo, which indicated a potential end to rising prices in the region.
  • Treasury Yields Decline Amid Rate Cut Hopes: US Treasury yields fell on Friday as investors reacted to the tame inflation data. The yield on the 10-year Treasury dropped by 3.5 basis points to 3.756%, while the 2-year yield fell by 5.6 basis points to 3.567%. 

FX Today:

  • EUR/USD Steady Amid Inflation Outlook: EUR/USD traded near $1.1159 on Friday, up by 0.07%, as markets absorbed the latest inflation data and looked ahead to future monetary policy decisions from both sides of the Atlantic. The pair is supported by the 50-day Simple Moving Average (SMA) at $1.1147, with the 100-day SMA at $1.1109 acting as further support. Upside resistance is seen at $1.1160, with a breakout potentially targeting $1.1200. However, any weakness below $1.1147 could lead to a test of the $1.1109 support level. Traders are cautious ahead of Eurozone inflation data, which could impact the pair’s trajectory next week.
  • GBP/USD Holds Steady as Bulls Face Resistance: GBP/USD edged lower by 0.09% to $1.3372 on Friday, as the pair consolidated just above key support levels. Despite strong bullish momentum in recent weeks, the pair struggled to break through resistance at $1.3400. The 50-day SMA at $1.3316 provides immediate support, while the 100-day SMA at $1.3221 offers further downside protection. A break below these levels could signal a shift in momentum, bringing the $1.3150 zone into focus. On the upside, a breakout above $1.3400 could trigger further gains, with the next target at $1.3500.
  • AUD/USD Faces Resistance Amid Soft Dollar: AUD/USD traded slightly lower at $0.6890, down by 0.17% as the pair faced strong resistance near the $0.6900 level. The Australian dollar has benefited from improving risk sentiment, but the pair has struggled to push decisively higher. The 50-day SMA at $0.6834 provides immediate support, while the 100-day SMA at $0.6766 offers additional downside protection. If AUD/USD can break above $0.6900, it could open the door for a test of $0.6950. However, with momentum indicators showing signs of fatigue, a pullback may be more likely in the short term.
  • NZD/USD Continues Ascent, Tests Key Resistance: NZD/USD continued its upward trend on Friday, adding 0.20% to reach $0.6354. The pair is nearing critical resistance at $0.6350, with buyers potentially preparing to retest this level. A break above could see the pair test the $0.6400 mark, while downside support lies at the 20-day SMA at $0.6220. Technical indicators, such as the Relative Strength Index (RSI), suggest that the pair is approaching overbought territory, signalling a potential pullback if resistance holds.
  • Gold Holds Near Key Levels Despite Pullback: Gold prices retreated slightly on Friday, trading at $2,657.97, down by 0.50% from recent highs. Despite this pullback, the precious metal remains in an overall uptrend, supported by ongoing inflation concerns and market uncertainty. If gold drops below the $2,650 level, traders should watch for a test of the $2,600 support zone. On the upside, a break above $2,685 could see gold targeting the next significant resistance at $2,700, with further gains potentially pushing prices towards $2,750. However, with momentum indicators pointing to potential profit-taking, traders should closely monitor the $2,650 support level.

Market Movers:

  • Bristol-Myers Squibb Jumps on FDA Approval: Shares of Bristol-Myers Squibb climbed 1.6% after the US Food and Drug Administration approved its groundbreaking schizophrenia drug, Cobenfy, marking the first novel treatment for the disorder in over 70 years. The drug is expected to be available by late October, providing a boost to the pharmaceutical company’s stock and outlook.
  • Novo Nordisk Slides on Sales Outlook: US-listed shares of Novo Nordisk fell 2.9% following a note from JPMorgan that warned of lower-than-expected sales for the third quarter. The bank cited a softer-than-anticipated outlook for Novo Nordisk’s blockbuster weight-loss drug, Wegovy, contributing to the stock’s decline.
  • Costco Misses Revenue Expectations, Stock Falls: Costco shares dropped 1.8% after reporting fiscal fourth-quarter revenue of $79.70 billion, just shy of the $79.97 billion consensus estimate. Weaker gasoline prices and cautious consumer spending on higher-priced items contributed to the revenue miss, weighing on the retailer’s stock.
  • Super Micro Computer Rebounds After Thursday’s Loss: Super Micro Computer shares gained 4%, recovering some of its 12% loss from the previous day. The company had come under pressure after reports that the US Justice Department opened a probe into its accounting practices. Despite these concerns, the stock bounced back as investors sought value following the sharp sell-off.
  • Cassava Sciences Sinks on SEC Settlement: Cassava Sciences saw its stock tumble 11% after agreeing to a $40 million settlement with the US Securities and Exchange Commission (SEC). The charges stemmed from “misleading statements” made in 2020 related to a clinical trial for an experimental Alzheimer’s drug, leading to investor concerns over the company’s future prospects.
  • Wynn Resorts Surges on Upgrade: Wynn Resorts jumped 7% after receiving an upgrade to overweight from equal weight by Morgan Stanley. The investment bank cited Wynn’s strong positioning in Las Vegas and the release of new details surrounding its UAE project as key drivers for the upgrade, helping to lift the stock higher.
  • Rocket Lab USA. Rallies on Analyst Optimism: Rocket Lab USA. shares soared more than 12% after KeyBanc Capital Markets raised its price target on the stock, maintaining an overweight rating. Analyst Michael Leshock highlighted increased confidence in Rocket Lab’s ability to scale its business following a non-deal roadshow, providing a bullish outlook for the aerospace and defence company.

As the week comes to a close, global markets continue to reflect optimism amid encouraging economic data and central bank stimulus. The Dow’s record-breaking performance and third consecutive week of gains signal growing confidence in the US economy, while inflation appears to be under control, fuelling hopes for further rate cuts. European markets reached all-time highs, lifted by strong performances in luxury and chemicals stocks, alongside stimulus news from China. In Asia, Chinese markets surged, led by the CSI 300’s best weekly performance since 2008, underscoring the positive impact of recent policy measures. Despite some pullbacks in tech-heavy indices like the Nasdaq, the overall market sentiment remains positive, with investors looking ahead to further developments in inflation and global growth.