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The Dow Just Soared Again – But Will the Federal Reserve Spoil the Party?

Last Updated September 23, 2020 1:59 PM
Francois Aure
Last Updated September 23, 2020 1:59 PM
  • The Dow started the week off with a bang, rising more than 300 points on Monday.
  • Bullish momentum continues in the U.S. stock market as Boeing carries the DJIA higher.
  • ING warns that the Federal Reserve could do something this week that could give bulls fits.

The Dow Jones exploded more than 300 points today, and – no surprise here – Boeing stock was the index’s top performer.

The stock market is burning bright ahead of the Federal Reserve meeting this week, but could the Fed spoil the party?

Dow Jones Keeps Climbing as Speculation Continues

Dow Jones, stock market, Boeing
The Dow Jones rose 300 points on Monday as the U.S. stock market continues to roll. | Source: Yahoo Finance 

All three of the major U.S. stock market indices rose on Monday. The Dow Jones led the way, and even the Nasdaq recovered from earlier losses to trade firmly in the green:

  • The Dow jumped 323.17 points or 1.19% to 27,434.15.
  • The S&P 500 rallied 0.75% to 3,218.
  • The Nasdaq rose 0.76% to 9,888.31.

It’s clear that risk appetite is through the roof, and a retail-driven rally has helped lift the U.S. stock market  out of the basement and back into the stratosphere.

Chris Beauchamp, chief market analyst at IG, has seen enough to conclude that a lasting bull trend is here. He says the stock market looks set to continue its ascent even if a temporary pullback remains on the cards.

Overall, markets continue to look past all the bad data and concentrate on the good news, hence the strong reaction to Friday’s job numbers. While this leaves indices vulnerable to a pullback, the strength of the bounce of the past month suggests that such weakness will be only temporary.

Any way you slice it, the Dow has been riding a wave of incredible momentum over the past few trading days.

Economic data has given hope that the stock market can continue to outperform, and with interest rates this low, cash remains such an unattractive asset in the eyes of yield-hungry Wall Street.

Federal Reserve May Seek to Cool Speculation This Week

Naturally, the Federal Reserve’s historic efforts to kill the U.S. dollar have a substantial impact on financial markets. While the consensus is pretty unanimous that we are in a “lower for longer” rate environment, the FOMC has been firm in its opposition to negative interest rates.

For this reason, economists at ING are anticipating that there will be some hawkish pushback at this week’s Fed meeting , stating in a recent report,

We suspect that there is a decent chance they will pencil in one rate rise before the end of 2022, which may help to dispel some talk of the potential for negative rates. Fed officials have been dismissive of this as a tool, and we do not expect it to be implemented.

Given the economic fundamentals of the U.S. economy, it would not be surprising if the Federal Reserve tried to calm what has been a genuinely epic period of speculation.

On the other hand, the U.S. central bank has historically not been as aggressive in lancing bubbles as it has been afraid of triggering a stock market crash.

Dow 30 Stocks: Boeing Blasts Even Higher

On an otherwise calm day for the Dow 30 , the index recorded an outsized gain thanks to Boeing.

Soaring a stunning 12% today alone, BA stock has more than doubled from its bear-market lows earlier in the year.

Moves were much less pronounced throughout the remainder of the index.

Jobs numbers and California’s hastily implemented reopening plans helped lift American Express 3%, while Exxon Mobil and Chevron continued to trade firmly as crude oil enjoyed the boost to consumption that has accompanied the dethawing of the global economy.

Only two DJIA stocks lost more than 1% on the day. Intel fell 1.8%, while UnitedHealth Group dipped 1.1% after new poll results showed President Donald Trump losing even more ground  to Joe Biden.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.