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Three catalysts are aligning to rev the bull market back up
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4 months agoon
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After a tough week, the stars are aligning for stocks to rip higher. The S & P 500 dropped 1.6% last week, while the Nasdaq Composite shed 3%, its worst weekly performance since April. The Dow Jones Industrial Average lost 1.2% last week. The three benchmarks also snapped three-week-long advances. Concerns around valuations in the artificial intelligence trade, along with worsening consumer sentiment, put a dent in equities last week. But traders at JPMorgan highlighted three catalysts that are lining up for the bull market to resume its upward trajectory: Government shutdown nearing its end Nvidia earnings due out next week Expectations for another Federal Reserve rate cut Government shutdown nearing its end A procedural vote in the U.S. Senate that paves the way for votes on a government funding agreement garnered the required 60-vote minimum. The agreement would reopen government into January and reverse part of the federal layoffs that took place during the shutdown. Stocks jumped Monday following the vote. The shutdown has not only delayed the release of key U.S. economic data, including the monthly jobs report, but has also raised concern over U.S. growth. “The biggest near-term catalyst would be a reopening of the government, which would buttress current quarter GDP forecasts but also may release more liquidity into the market, which typically is supportive of stocks,” JPMorgan’s trading desk wrote. Nvidia earnings coming out next week Nvidia is set to report earnings Nov. 19, with investors expecting another strong quarter from the AI stalwart. “NVDA earnings can assuage concerns on the AI theme as well as supporting revenue / EPS growth outperformance this quarter,” JPMorgan traders said. Nvidia shares lost 7% last week as valuation worries dampened sentiment toward everything tied to AI. However, many analysts expect strong numbers out of the chipmaker, including Citigroup’s Atif Malik. Malik raised his price target on Nvidia to $220 from $210, signaling upside of about 17%. He said he expects a “beat and raise” from Nvidia . Expectations for another Fed rate cut “Lastly, it seems most likely that the Fed delivers another 25bps cut in December unless we see the labor market see an unlikely surge in hiring,” the JPMorgan traders said. The Fed’s final meeting of the year is scheduled for Dec. 9-10. The CME Group’s FedWatch tool shows interest rate futures trading suggesting the central bank will lower its overnight rate to a range of 3.50%-3.75% from the current 3.75%-4.00%.
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