Wall Street, metals gained on Chinese stimulus and tech boost

·         At TTM EPS around $191 and life time high of around 5800, S&P-500 TTM PE is now over 30; at an extreme bubble zone

·         SPX-500 scaled a new life time high on hopes of bigger Fed rate cuts and policy continuity under Harris

·         Gold also scaled a new life time high on an escalating war-like situation between Israel and Hezbollah

·         But this may be the last phase of the Gaza war as a ceasefire may come soon before the US election; back-channel talks are in very active stage

Wall Street Futures led by DJ-30 and SPX-500 scaled a new life time high (LTH) on hopes & hopes of bigger Fed pivots/rate cuts and an early end of QT (by Dec’24?). But tech-savvy NQ-100 underperformed to some extent due to the growing tech war between the US and China (domestic political compulsion ahead of the US election). Also, subdued report cards from FedEx have undercut the broader market. An upbeat PMI report by S&P Global also affected the Fed pivot trade Monday.

On early Tuesday, Wall Street Futures, Metals, and even oil were also boosted by China's PBOC stimulus plan to boost not only real estate but also the overall economy from years of slumber, especially after the Trump trade war tantrum and followed by COVID conspiracy. The Chinese economy may be now suffering from excess capacity, lower demand, and a subsequent deflation-like scenario. Export-heavy China is suffering from weak global demand/trade and also subsequently subdued domestic demand, resulting in abnormally lower inflation or deflation-like scenarios.

On early Tuesday, just days after Fed easing, as a part & parcel of synchronized global easing, China/PBOC also announced some stimulus measures to boost domestic demand. The PBOC introduced several measures to boost the economy amid concerns that the official growth target of around 5% might be out of reach due to recent weak data. The PBOC Governor Pan said in a rare media briefing that the Chinese central bank will cut the reserve requirement ratio (RRR) by -50 bps, which will inject CNY 1T into the financial system, with the possibility of another reduction of -25 bps or -50 bps later this year. In addition, the PBOC will lower the seven-day reverse repo rate by -20 bps to 1.5%, aiming to reduce short-term borrowing costs for banks. This move is accompanied by a -30 bps reduction in borrowing costs of the medium-term lending facility (MLF).

Chinese Mortgage rates will also be trimmed, with an expected average drop of -50 bps, and the minimum down payment for second homes will be cut to 15% from 25%. But Pan did not specify when all these moves will take effect. This followed the unexpected PBOC decision Monday to cut the 14-day reverse repo rate by -10 bps to 1.85%.

Additionally, PBOC benchmark loan prime rates are expected to be lowered by 20-25 bps following their hold at the September meeting. The PBOC also anticipates lowering existing mortgage rates by about 50 bps, potentially reducing household interest payments by around CN¥ 150 billion. Furthermore, down-payment requirements for second homes will be cut to 15%, aligning them with those for first-home purchases. Overall, these measures underscore Beijing's commitment to achieving a 5% GDP target for 2024.

Additionally, the PBOC plans to cut existing mortgage rates by around 50 basis points, potentially reducing household interest payments by about CN¥ 150 billion. The central bank also announced a reduction in down-payment requirements for second homes to 15%, aligning them with first-home purchases. These measures reflect the PBOC's intensified commitment to achieving a 5% GDP target for 2024. Overall, the latest PBOC monetary stimulus plan will provide more liquidity/funds at lower borrowing costs for the Chinese economy. Thus Chinese savvy US MNCs surged Tuesday led by Alibaba, and JD Com.

On Tuesday, Fed’s Governor Bowman issued an article after publicly/officially dissented from the jumbo Fed rate cut of -0.50% in favor of smaller/regular/normal rate cuts -0.25%; Bowman may be the rare dissenter in a FOMC meeting since 2005.

Recent Views on Monetary Policy and the Economic Outlook: Governor Michelle W. Bowman

“In light of last week's Federal Open Market Committee (FOMC) meeting, I will begin my remarks by providing some perspective on my vote and will then share my current views on the economy and monetary policy.

Update on the Most Recent FOMC Meeting

To address high inflation, for more than two years, the FOMC increased and held the federal funds rate at a restrictive level. At our September meeting, the FOMC voted to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent and to continue reducing the Federal Reserve's securities holdings.

As the post-meeting statement noted, I dissented from the FOMC's decision, preferring instead to lower the target range for the federal funds rate by 1/4 percentage point to 5 to 5‑1/4 percent. Last Friday, once our FOMC participant communications blackout period concluded, the Board of Governors released my statement explaining the decision to depart from the majority of the voting members. I agreed with the Committee's assessment that, given the progress we have seen since the middle of 2023 on both lowering inflation and cooling the labor market, it was appropriate to reflect this progress by recalibrating the level of the federal funds rate and beginning the process of moving toward a more neutral stance of policy. As my statement notes, I preferred a smaller initial cut in the policy rate while the U.S. economy remains strong and inflation remains a concern, despite recent progress.

Economic Conditions and Outlook

In recent months, we have seen some further progress in slowing the pace of inflation, with monthly readings lower than the elevated pace seen in the first three months of the year. The 12-month measure of core personal consumption expenditures (PCE) inflation, which provides a broader perspective than the more volatile higher-frequency readings, has moved down since April, although it came in at 2.6 percent in July, again remaining well above our 2 percent goal.

In addition, the latest consumer and producer price index reports suggest that 12‑month core PCE inflation in August was likely a touch above the July reading. The persistently high core inflation largely reflects pressures on housing prices, perhaps due in part to low inventories of affordable housing. The progress in lowering inflation since April is a welcome development, but core inflation is still uncomfortably above the Committee's 2 percent goal.

Prices remain much higher than before the pandemic, which continues to weigh on consumer sentiment. Higher prices have an outsized effect on lower- and moderate-income households, as these households devote a significantly larger share of income to food, energy, and housing. Prices for these spending categories have far outpaced overall inflation over the past few years.

Economic growth moderated earlier this year after coming in stronger last year. Private domestic final purchases (PDFP) growth has been solid and slowed much less than gross domestic product (GDP), as the slowdown in GDP growth was partly driven by volatile categories including net exports, suggesting that underlying economic growth was stronger than GDP indicated. PDFP has continued to increase at a solid pace so far in the third quarter, despite some further weakening in housing activity, as retail sales have shown further robust gains in July and August.

Although personal consumption has remained resilient, consumers appear to be pulling back on discretionary items and expenses, as evidenced in part by a decline in restaurant spending since late last year. Low- and moderate-income consumers no longer have extra savings to support this type of spending, and we have seen loan delinquency rates normalize from historically low levels during the pandemic.

The most recent labor market report shows that payroll employment gains have slowed appreciably to a pace moderately above 100,000 per month over the three months ending in August. The unemployment rate edged down to 4.2 percent in August from 4.3 percent in July. While unemployment is notably higher than a year ago, it is still at a historically low level and below my and the Congressional Budget Office's estimates of full employment.

The labor market has loosened from the extremely tight conditions of the past few years. The ratio of job vacancies to unemployed workers has declined further to a touch below the historically elevated pre-pandemic level—a sign that the number of available workers and the number of available jobs have come into better balance. But there are still more available jobs than available workers, a condition that before 2018 has only occurred twice for a prolonged period since World War II, further signaling ongoing labor market strength despite the reported data.

Although wage growth has slowed further in recent months, it remains indicative of a tight labor market. At just under 4 percent, as measured by both the employment cost index and average hourly earnings, wage gains are still above the pace consistent with our inflation goal given trend productivity growth.

The rise in the unemployment rate this year largely reflects weaker hiring, as job seekers entering or re-entering the labor force are taking longer to find work, while layoffs remain low. In addition to some cooling in labor demand, there are other factors likely contributing the increased unemployment. A mismatch between the skills of the new workers and available jobs could further raise unemployment, suggesting that higher unemployment has been partly driven by the stronger supply of workers. It is also likely that some temporary factors contributed to the recent rise in the unemployment rate, as unemployment among working-age teenagers sharply increased in August.

Preference for a More Measured Recalibration of Policy

The U.S. economy remains strong and core inflation remains uncomfortably above our 2 percent target. In light of these economic conditions, a few further considerations supported the case for a more measured approach in beginning the process to recalibrate our policy stance to remove restrictions and move toward a more neutral setting.

First, I was concerned that reducing the target range for the federal funds rate by 1/2 percentage points could be interpreted as a signal that the Committee sees some fragility or greater downside risks to the economy. In the current economic environment, with no clear signs of material weakening or fragility, in my view, beginning the rate-cutting cycle with a 1/4 percentage point move would have better reinforced the strength in economic conditions, while also confidently recognizing progress toward our goals. In my mind, a more measured approach would have avoided the risk of unintentionally signaling concerns about underlying economic conditions.

Second, I was also concerned that reducing the policy rate by 1/2 percentage point could have led market participants to expect that the Committee would lower the target range by that same pace at future meetings until the policy rate approaches a neutral level. If this expectation had materialized, we could have seen an unwarranted decline in longer-term interest rates, and broader financial conditions could become overly accommodative. This outcome could work against the Committee's goal of returning inflation to our 2 percent target.

I am pleased that Chair Powell directly addressed both of these concerns during the press conference following last week's FOMC meeting.

Third, there continues to be a considerable amount of pent-up demand and cash on the sidelines ready to be deployed as the path of interest rates moves down. Bringing the policy rate down too quickly carries the risk of unleashing that pent-up demand. A more measured approach would also avoid unnecessarily stoking demand and potentially reigniting inflationary pressures.

Finally, in dialing back our restrictive stance on policy, we also need to be mindful of what the endpoint is likely to be. My estimate of the neutral rate is much higher than it was before the pandemic. Therefore, I think we are much closer to neutral than would have been the case under pre-pandemic conditions, and I did not see the peak stance of policy as restrictive to the same extent that my colleagues may have. With a higher estimate of neutral, for any given pace of rate reductions, we would arrive at our destination sooner.

Ongoing Risks to the Outlook

Turning to the risks to achieving our dual mandate, I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment. Although the labor market data have been showing signs of cooling in recent months, still-elevated wage growth, solid consumer spending, and resilient GDP growth are not consistent with a material economic weakening or fragility. My contacts also continue to mention that they are not planning layoffs and continue to have difficulty hiring. Therefore, I am taking less signal from the recent labor market data until clear trends are indicating that both spending growth and the labor market have materially weakened.

I suspect the recent immigration flows have and will continue to affect labor markets in ways that we do not yet fully understand and cannot yet accurately measure. In light of the dissonance created by conflicting economic signals, measurement challenges, and data revisions, I remain cautious about taking signals from only a limited set of real-time data releases.

In my view, the upside risks to inflation remain prominent. Global supply chains continue to be susceptible to labor strikes and increased geopolitical tensions, which could result in inflationary effects on food, energy, and other commodity markets. Expansionary fiscal spending could also lead to inflationary risks, as could an increased demand for housing given the long-standing limited supply, especially of affordable housing. While it has not been my baseline outlook, I cannot rule out the risk that progress on inflation could continue to stall.

Although it is important to recognize that there has been meaningful progress on lowering inflation, while core inflation remains around or above 2.5 percent, I see the risk that the Committee's larger policy action could be interpreted as a premature declaration of victory on our price-stability mandate. Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the long term.

In light of these considerations, I believe that, by moving at a measured pace toward a more neutral policy stance, we will be better positioned to achieve further progress in bringing inflation down to our 2 percent target, while closely watching the evolution of labor market conditions.

The Path Forward

Despite my dissent at the recent FOMC meeting, I respect and appreciate that my FOMC colleagues preferred to begin the reduction in the federal funds rate with a larger initial cut in the target range for the policy rate. I remain committed to working together with my colleagues to ensure that monetary policy is appropriately positioned to achieve our goals of attaining maximum employment and returning inflation to our 2 percent target.

I will continue to monitor the incoming data and information as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to adjusting the stance of policy going forward. It is important to note that monetary policy is not on a preset course. My colleagues and I will make our decisions at each FOMC meeting based on the incoming data and the implications for and risks to the outlook guided by the Fed's dual-mandate goals of maximum employment and stable prices. We need to ensure that the public understands clearly how current and expected deviations of inflation and employment from our mandated goals inform our policy decisions.

By the time of our next meeting in November, we will have received updated reports on inflation, employment, and economic activity. We may also have a better understanding of how developments in longer-term interest rates and broader financial conditions might influence the economic outlook.

During the intermeeting period, I will continue to visit with a broad range of contacts to discuss economic conditions as I assess the appropriateness of our monetary policy stance. As I noted earlier, I continue to view inflation as a concern. In light of the upside risks that I just described, it remains necessary to pay close attention to the price-stability side of our mandate while being attentive to the risks of a material weakening in the labor market. My view continues to be that restoring price stability is essential for achieving maximum employment in the long run. However, should the data evolve in a way that points to a material weakening in the labor market, I would support taking action and adjusting monetary policy as needed while taking into account our inflation mandate.

Closing Thoughts

In closing, thank you again for welcoming me here today. It is a pleasure to join you and to have the opportunity to discuss my views on the economy and monetary policy. Given the recent FOMC meeting decision and my dissent, I appreciate being able to provide a more detailed explanation of the reasoning that led me to dissent in favor of a smaller reduction in the policy rate at last week's FOMC meeting.

I look forward to answering your questions and to engaging with your members on bank regulatory and supervisory matters.”

Overall, Fed Governor Bowman favored the start of the current easing cycle of multiple rate cuts over the next two years with initial -25 bps rather than -50 bps as:

·         Core PCE/CPI inflation may stall in the coming months

·         Although the labor market has cooled to some extent, the headline unemployment rate averaging around 4.0% is still around the maximum employment mandate levels of the Fed

·         Wage growth of around +4.0% is still above productivity growth of +2.9%  and thus needs to be further cooled so that it may not translate into wage inflation

·         The financial market may assume that a -50 bps cut in Sep’24 is the new normal rate cut pace by the Fed and subsequently, bond yields may go abnormally lower, resulting in financial loosening, and inflation may surge again along with inflation expectations

·         The jumbo cut of -50 bps in Sep’24 may be also interpreted by the market as the Fed viewing the fight against elevated inflation as over unless the Fed acknowledged it one time catch up effort to a previous policy mistake (by not cutting in the June-July’24 meeting despite a similar set of data)

·          The recent uptick in the unemployment rate may be due to some transitory factors like higher immigration/higher labor supply vs inadequate fresh job creations; skill mismatch; an increasing number of multiple jobholders

·         The neutral rate estimate may be somehow higher than pre-COVID levels

·         Despite restrictive rates for the last few quarters, the US economy remains robust with resilient consumer spending and a solid labor market; there is still an upside risk in inflation while the average unemployment rate is still around minimum  levels of 4.0% (in line with Fed’s sustainable estimate for the longer term)

There is an upside risk in inflation in the coming days amid global supply chain fragility due to lingering geo-political tensions and fragmentations, and possible additional fiscal stimulus for housing under the next admin (Harris)

On Tuesday, NY Fed’s SOMA Head Peril said:

·         Fed is not close to the end of balance sheet reduction (QT)

·         In preparation for last week’s FOMC meeting, market intelligence was especially helpful in three ways:

·         First, it informed our understanding of what drove the volatility seen in early August and our overall assessment that markets had absorbed the shock well. The Committee was free to approach an important policy decision without having to be concerned about markets being fragile.

·         Second, it helped us better understand the evolution of policy expectations, which fluctuated materially over the intermeeting period. In light of the progress on inflation and the balanced risks to the achievement of its goals, the Committee decided to reduce the federal funds rate by 50 basis points last week.

·         Futures markets did not fully price the extent of the move, but the intelligence we collected from surveys, written commentaries, and other sources suggested that investors were likely to interpret a 50-basis-point cut exactly for what it was—a recalibration of the FOMC policy toward a more neutral stance that will help maintain the strength of the economy and the labor market while continuing to enable further progress on inflation.

·         Third, market intelligence had been indicating clearly for many months that market participants understood well that there is no mechanical link between interest rates and balance-sheet decisions.

·         As Chair Powell said, the ongoing balance sheet reduction and the cut in the federal funds rate last week are both part of the process of normalization of the monetary policy stance, and they are therefore perfectly compatible with each other.

·         I fully expect that this message will continue to resonate with investors

·         As laid out in the May 2022 plans, the Committee intends to stop balance sheet reduction when reserves are somewhat above the ample level. For now, we don’t appear to be close to that point.

The US productivity growth of around 2.9% is lower than the wage growth of +4.0%, which may result in wage inflation again.

Fed needs around +3.0% wage growths (ECI) for its price stability targets of +2.0%.

Conclusions:

Fed/Powell may have taken the jumbo rate cut decision in Sep’24 after being confident about no Trump 2.0 in the blackout period and after missing a rate cut opportunity in June-July’24. Although Powell batted for blackout period data to justify the jumbo cut, in reality, he may have gained confidence about starting the process of the next easing cycle after being confident about no Trump 2.0 (Trump Tantrum 2.0) after the Trump-Harris debate on 10th September. Powell almost acknowledged in the Q&A that the Fed may have missed one rate cut opportunity in June-July’24 due to the concern of Trump tantrum 2.0 as former President Trump has already issued some veiled warning for Powell to go for any ‘unnecessary’ rate cuts to help Bidn-Harris admin.

In any way, the ‘apolitical’ Fed's credibility may be now at stake as after jawboning gradual (normal) 25 bps cuts for months, the Fed goes suddenly for -50 bps cuts just ahead of the Nov’24 election based on just one inflation and retail sales report in the blackout period which also indicated stalled core disinflation and resilient consumer spending.

Fed always keeps changing its goalposts to accommodate its changing narrative. Although the Fed usually targets core inflation (PCE+CPI average), this time Powell tried to defend the unexpected/unusual crisis era jumbo rate cut of -50 bps by pointing to the sharp decline of total CPI in Aug’24 to +2.5% from the prior +2.9% sequentially and an average of +3.2% in H1CY24; +4.1% in CY23. But the core CPI was stalled at +3.2% against H1CY24 average levels of +3.6%; and +4.8% in CY24.

The sharp fall in total CPI was due to a rapid fall in fuel/oil/energy prices. In his last Congressional testimonial, Powell reiterated Fed always targets core inflation rather than total inflation due to volatile fuel & food. But it prefers both inflations to be around +2.0% on a sustainable basis for its price stability mandate. Fed usually prefers core PCE inflation around +1.5% and +2.3% core CPI for durable price stability (core inflation (1.5+2.3)/2=1.9%); core PCE is always less than core CPI by around -0.50% on an average.

Against this price stability target of +2.0% average core inflation (PCE+CPI), the Fed aspires that the unemployment rate would be around 3.5% (~3.6%) on an average for a sustainable achievement of dual mandate (maximum employment and price stability). Although the Fed’s longer-term sustainable average unemployment rate is around 4.0%, it usually keeps the red line at 4.5% (as maximum tolerable) and the green line at 3.5% (minimum, below which there is a threat of deflation).

As per core CPI and PPI data, US core PCE inflation may come around +2.8-2.7% in Aug’24 against +2.6% in July (unless there is another abnormal revision). In that scenario, the average US core inflation (PCE+CPI) would be around +3.0% against +4.0% unemployment rates for YTM 2024 (till August). Thus Fed is now targeting to bring down average core inflation back to +2.0% on a sustainable basis keeping the average unemployment rate around 4.0% for its dual mandate. And if the US unemployment rate falls below 4.0% towards 3.5%, it would be a bonus for the Fed or a dream scenario. However, the Fed projected an elevated unemployment rate of around 4.4% by Dec’24 and Dec’25 amid a huge influx of immigrants in the US after COVID; the US labor force is now growing much more than US job openings or fresh job creation.

Although higher population growths, even by immigrants and not native Americans (declining birth rate) is causing higher demand, higher consumer spending, and higher GDP growths (than historical trends), it’s also causing high inflation as the supply capacity of the US economy is not increasing proportionately due to lack of adequate fiscal/infra stimulus and political/policy paralysis like situation for decades; US political/election system does not favor Trifecta/absolute majority for either Democrats or Republicans for more than two years. Even in exceptional situations. If one party gets a Trifecta (White House, House, and Senate) through the Presidential election, it may eventually lose it after the mid-term election only two years later.

Also, the US has now around $40T public debt if we consider both Federal ($35T) and state debts ($5T) and is paying more than 15% of core tax revenue as interest on such public debt and nominal GDP around $ 28 T. Thus US Congress, Treasury and also Fed has always an issue with such huge public debt and interest burden and fiscal policy.

Although as the global reserve and most trusted currency, USD is always in great demand globally from various countries and even terrorists! Thus despite almost 24/7 printing, USD has not tuned into a toilet paper, but the never-ending cycle of increasing public deficit, public debt, and currency devaluation (3D) is boosting Gold as an inflation hedge traditional asset in limited supply. Also, Gold is being boosted by safe-haven asset appeal amid lingering geopolitical tensions (Ukraine and Gaza war), especially in the last few years under the Biden admin (war-savvy Democrats!)

Looking ahead, the US needs to recalibrate its policy on immigration and fiscal/infra stimulus to balance the growing demand of the economy by growing supply capacity; otherwise, there may be higher inflation, higher unemployment and the Goldilocks nature of the US economy may be at risk, making Fed’s jobs more difficult. The present immigration flood into the US is being led by countries like India, Mexico, and also China to some extent.

Apart from any political narrative, even if we take the US economic data at face value despite abnormal revisions even after several months, the Fed has miscommunicated with the market; and also created confusion and asset bubbles by jawboning too much. Normally, the Fed never surprises the market as it has immense jawboning power and policy space. But this time, despite a very low FFR Swap probability of -50 bps cut, the Fed goes for the same, maybe after being confident not only about disinflation & reaching price stability target of +2.0% inflation, but also no Trump 2.0, Trumpflation, and Trump tantrum. Powell may not have to face Trump again in 2025.

Now, looking ahead, the Fed may take a pause in Nov’24 due to very little economic data and may cut -50 or -25 bps in Dec’24 (Q4CY24 end) and then may shift to -25 bps normal pace of rate cuts each QTR end (every alternate meeting) in 2025 for a cumulative cut -100 bps (for 2025). Further, the Fed may cut -50 bps in 2026 for an indicative terminal/neutral rate of +3.00% Compared to the Jun’24 sot-plots of +2.75%. Fed has front-loaded 50 bps rate cuts from 2026 into 2024 and also fully dialed back 25 bps projected rate cut in 2027 and projected higher longer-term neutral terminal rate at +3.00% against earlier +2.75%.

Further assuming +2.0% average core inflation (PCE+CPI); the Fed may now want to maintain a minimum real positive rate at +1.00% against pre-COVID times +0.50% and June’24 projections of +0.75%; i.e. Fed may maintain lowest range of real positive neutral rate at 0.50-1.00%.On the higher side, the Fed may also maintain a 2.00-2.50% real positive rate (as restrictive). But at the same time, the Fed will be flexible and nimble as always in line with actual economic data and outlook thereof and thus may change the goalpost again.

Although Fed may not cut again on 7th November, just days before the US election, and should wait for the next QTR end (Dec’24), considering underlying political pressure, Fed may also change its rhetorics to say that it has done a ‘policy mistake’ by not cutting in March and June QTR (after negative revisions in NFP/job data), it’s now correcting the path by going for another 25 bps cut in Nov’24 followed by another -25 bps in Dec’24. Thus Fed may also cut 25 bps in Nov’24 and then another 25 bps in Dec’24 to be ahead of the ‘recession’ curve and continue the normal -25 bps rate cuts every QTR end in 2025 too.

Another point is that Aug’24 core PCE inflation may tick up and the overall core disinflation process may slow down in Sep-Nov’24, while the unemployment rate may also come down below 4.0% ahead of Nov’24 election. Oil may also flare up amid growing war/conflict between Israel and Hezbollah/Lebanon/Iran just ahead of the US election along with Russia-Ukraine (Putin conspiracy?). Thus Fed may also cut -25 bps in Dec’24 after pausing in Nov’24 due to an unfavorable mix of data.

Bottom line:

Looking ahead, with the fading concern of Trump tantrum 2.0, Fed/Powell may go for a normal gradual rate cut pace of -25 bps every alternate meeting (each QTR end) in line with actual economic data and outlook thereof from 2025. But the Fed may go for a pause in Nov’24 and may cut either by -50 bps or even -25 bps depending upon actual economic data (unemployment and core inflation rate) and also policy action by ECB, BOE, and BOC as G4 central banks have to maintain or may want to maintain pre-COVID real spreads by going for similar synchronized easing to manage FX and export/import/imported inflation equation, everything being equal.

Market Impact:

Wall Street Futures edged up Tuesday on Chinese stimulus. Overall, the latest PBOC monetary stimulus plan will provide more liquidity/funds at lower borrowing costs for the Chinese economy. Thus Chinese savvy US MNCs and US-listed Chinese companies surged Tuesday led by Alibaba, JD Com, and PDD Holdings. Semiconductor/Chip stocks led the charge, with gains from Nvidia, Broadcom, AMD, Taiwan Semiconductor (TSMC) and Intel. Visa dragged DJ-30 as DOJ reportedly preparing to hit Visa with antitrust suit over debit card monopoly.

On Tuesday, Wall Street was boosted by materials, techs, consumer discretionary, industrials, and communication services, while dragged by banks & financials, utilities, consumer staples, energy, healthcare, and real estate. Scrip-wise Wall Street was boosted by Caterpillar, Salesforce, Home Depot, Nike, 3M, Intel, Verizon, Walt Disney, Honeywell, Cisco, Walmart, McDonald’s, Apple, United Health, IBM, and Goldman Sachs, while dragged by Visa, Amgen, Microsoft, Merck, Travelers, Coca-Cola, American Express, Boeing (lingering labor problem), P&G, J&J and Chevron.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Whatever the narrative, technically Dow Future (42500) has to sustain over 42700 for any further rally to 42900/43050-43250 and 43500/44000-44500/44800 in the coming days; otherwise sustaining below 42600/650, DJ-30 may again fall to 42400/42300-42100/42000 and 41800/41500-41200/41000* and further 40700/40300-40100/40000* and 39700/394350-39000*/38500 in the coming days.

Similarly, NQ-100 Future (20200) has to sustain over 20400 for a further rally to 20600/20700-20800/21050* and further to 21300/21700-21900/22050 and even 23000 levels in the coming days; otherwise, sustaining below 20350/300, NQ-100 may again fall to 20000/19750* and 19600/19350-19100/18900 and further 18750/18550-18400/18200-17950/17600 and 17450-17300/17000 in the coming days.

Technically, SPX-500 (5780), now has to sustain over 5850 for any further rally to 5900 and 6000/6050-6100/6150 in the coming days; otherwise, sustaining below 5825/800, may again fall to 5725-5675/5625-5600/5575*-5550/5500-5475/5450 and 5425/5390-5370/5300* and 5250/5100* and further 5050/4950*-4850/4750 in the coming days.

Also, technically Gold (XAU/USD: 2625) has to sustain over 2655 for a further rally to 2675*/2700-2725/2750 in the coming days; otherwise sustaining below 2650/2645, may again fall to 2625 and 2595/2590-2585/2575, may again fall to 2560*/2540-2530/2515 and 2495/2480-2470*/2425 and further 2415/2400-2390/2375 in the coming days (depending upon Fed rate cuts and Gaza/Ukraine war trajectory).