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Despite a Weak GDP, The S&P 500 and Nasdaq 100 Maintain Fed-Induced Bullish Momentum, Why?

Despite a Weak GDP, The S&P 500 and Nasdaq 100 Maintain Fed-Induced Bullish Momentum, Why?

Despite poor GDP figures, the S&P 500 and Nasdaq 100 are expected to gain for the second day.


Bets fuels optimism on Wall Street that the Federal Reserve would soon switch to a less aggressive monetary policy in response to mounting recession concerns.


On Friday, the June core PCE report will be revealed, and all eyes will be on it.


U.S. stocks managed to extend the Fed-induced bounce from the prior session after suffering significant losses in the opening trade, gaining ground for the second straight day despite weak economic data like the most recent gross domestic product report.


At market close, the S&P 500 increased 1.21 percent to 4,072, its highest level since June 9. Tesla and Microsoft shares also saw significant gains. The 10-year yield momentarily dropped to 2.65 percent, its lowest level since mid-April, helping to support the Nasdaq 100, which recovered from a 1.5 percent slump and increased by 0.92 percent to 12,718.


Following the Federal Reverse's statement that unusually significant hikes will rely on data moving forward at the close of its FOMC meeting on Wednesday, which hinted that policymakers might decrease the rate increases in the future, sentiment on Wall Street remained optimistic.


In terms of the economy, the U.S. GDP continued to decrease in the second quarter, declining by 0.9 percent annualized after falling by 1.6 percent in the first three months of the year. Even though the worsening growth profile is not a cause for celebration, investors are speculating that the bad news may be good news in the sense that a downturn may prompt the U.S. central bank to adopt a less hawkish stance sooner than anticipated, a scenario that could support a sustainable recovery in risk assets.


The U.S. Treasury Secretary Janet Yellen later provided:

 

l Positive remarks on the outlook.

l Noting that the economy is still resilient and the labor market is solid.

l Helping to alleviate concerns about an oncoming recession.

 

This further strengthened the bullish tone.


Shortly, investors will continue to pay close attention to the earnings season as they search for signs of how Corporate America will be affected by soaring inflation, decreasing demand, and tightening financial conditions. The Fed's preferred inflation measure, the core PCE report, which is expected to rise 0.5 percent monthly and 4.7 percent annually, will focus on Friday. The statistics will need to demonstrate a significant deceleration in price increase before the market sentiment can further improve, which is unlikely to occur until later this summer.


TECHNICAL CHART FOR S&P 500

The S&P 500 managed to break through a significant ceiling near 4,065 following a good day on Thursday, which allowed prices to soar to the highest level since June 9. The index may soon gather momentum to launch an assault on the 4,160/4,175 level, the following technical barrier in play, with the mood on the mend after today's bullish breakout. The goal shifts to channel resistance close to the psychological 4,300 level on further strength. On the other hand, initial support appears at 4,065, followed by 3,920 if sellers return to fade the current gain. A pullback towards 3,815 shouldn't be ruled out if both floors are invalidated.

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