Last week US stocks rallied, the question is why did stocks rallied last week ?
Stock market last week.
Last week US stocks rallied. Dow jones rallied 4.9%, S&P 500 rallied 4.7% while Nasdaq rallied 5.2%. Last week energy shares outperformed where as real estate sector didn’t rallied. Corporate earnings are improving for Q3 of 2022 and expectation that GDP for Q3 will be between 2.7% to 2.9%.
Despite high inflation, consumer spending is increasing as indicated by credit card spending. Investors are getting confidence that Federal Reserve will not go aggressive on monetary policy tightening.
Major events last week
(1) 10 year US Treasury rate :
The 10 year US treasury is at 4.33% which is higher than that in 2008.
(2) About rate hike by Fed :
Some of Fed officials has started hinting that there is possibility that rate hike may be slow down this quarter. Rate hike may be stopped early next year. Speculation for above is due to slowing down of US economy due to aggressive rate hike by Fed.
(3) Strong Quarterly Q3 2022 Results :
Bank of America posted a strong Q3 result, outperforming the street estimate. Other mega cap are also declaring good Q3 result.
Is market expected to bottomed out.
History has shown US market ended 57% to 80% of times in month of October, November and December 2022. US economy GDP is expected to raise about 2.8% in Q3 of 2022. But it is expected that next year again there will be slowdown of GDP, as Fed will increase rate increase till inflation is in control.
Which stock to buy ?
The mage cap stocks Apple Inc ( APPL ), Microsoft ( MSFT ), Google Alphabet ( GOOGL ) and Amazon ( AMZN ), cumulative weightage is around 20% in indexes Dow Jones, S&P 500 and almost one third in Nasdaq. It has been seen on recovery first mage cap will recover faster. But share market investing is risky, investor should do there own research. Stocks are risky investment despite correction of 30% still can correct to 10% to 15% from current level.
Conclusion
US stock market has rallied last week Dow Jones 4.9%, S&P 500 4.7% while Nasdaq rallied to 5.2%. This rally has come on speculation / expectation of positive GDP growth and strong mage cap Q3 results. But will the market rally from now cannot be said. I am investing in staggered manner in US stock market and ETF’s.
