On the evening of September 24th, US stocks opened slightly higher on Tuesday, and the three major indexes maintained a slight fluctuating trend at the beginning of the session. As of the time of writing,$Dow Jones Industrial Average (.DJI.US)$ up 0.03%, $Nasdaq Composite Index (.IXIC.US)$ up by 0.11%, $S&P 500 Index (.SPX.US)$ down by 0.05%.

Although the three major US stock indexes had small gains on Monday, they still continued the upward trend after the Fed's half-point rate cut last week. Currently, the federal funds rate in the United States ranges from 4.75% to 5%.

In recent weeks, driven by expectations of a Fed rate cut, rate-sensitive sectors such as utilities and finance have risen.

Paul Hickey, co-founder of Bespoke Investment Group, stated that currently four sectors in the S&P 500 index are outperforming the large cap in 2024, compared to only two sectors in July.

Hickey said: "There have been many changes beneath the surface. You can see that the baton of the stock market has been passed from these large stocks to a broader market."

Quincy Krosby, Chief Global Strategist at lpl financial, said that while traders cheered the significant rate cut, the market may experience intense volatility in the coming weeks.

She said: "Given that the market valuations have risen significantly after the Fed's substantial rate cut, the market will be highly sensitive to any signs indicating the economy is softening at a faster pace."

Investors are still evaluating the dovish speeches given by several Fed officials.

Fed Governor Bowman said on Tuesday that he supported the earlier 25 basis point rate cut at the FOMC meeting. Bowman stated: "I will continue to take a cautious approach to further rate cuts. The possibility of a stalling progress in combating inflation cannot be ruled out. Core inflation rates remain "uncomfortably" above the 2% target."

Bauman said: "If the labor market weakens, it will support policy adjustments; the labor market has not shown a clear trend of weakness; inflation risks are greater than labor market risks."

Prior to this, Chicago Fed President Austan Goolsbee said on Monday that a "sharp" rate cut is needed to protect the US labor market and support the US economy, and predicted that interest rates will be cut many times in the next year. He stated that as inflation approaches the Fed's target, the focus should shift to the labor market, "this may mean more rate cuts in the coming year."

Minneapolis Fed President Neel Kashkari also pointed out the weakness in the job market, expressing support for another 50 basis point rate cut by the end of the year.

Kashkari said U.S. inflation has significantly cooled and is near the Fed's 2% target, while the labor market is starting to show signs of weakness. He stated: 'The balance of risks has shifted from rising inflation to further weakening in the labor market, so it is necessary to lower the federal funds rate.'

Atlanta Fed President Bostic stated that launching the Fed's easing cycle with a substantial rate cut will bring interest rates closer to neutral levels, but officials should not make a commitment to maintaining the tone of significant interest rate cuts.

He stated that last week the Fed's monetary policy meeting cut rates by 50 basis points, but did not 'lock in' the pace of future rate cuts. The latest 'dot plot' shows a 'considerable' level of internal disagreement within the Fed; the range of views on future development paths and discussions on the neutral interest rate are 'strong.'

Traders expect policy to ease by nearly 75 basis points by the end of the year, indicating that there will be at least one more significant rate cut. Investors are now awaiting the Fed's preferred price indicators later this week and US personal spending data to further assess the depth of future rate cuts.

There is currently a divergence in the market on whether the Fed will cut rates by 50 basis points or 25 basis points in November. The Chicago Mercantile Exchange's FedWatch tool shows that there is an expected 76 basis point easing space priced in the market this year.

Elias Haddad, Senior Market Strategist at Brown Brothers Harriman, stated that the market has overestimated the ability of the Federal Reserve to ease policies. However, he mentioned that strong US employment data may lead to a significant upward revision in market expectations for the federal funds rate.

The next Non-Farm Payrolls report will be released on October 4th. Prior to this, Haddad stated that the dovish stance of the Federal Reserve and a robust US economy will support market sentiment, further weakening the US dollar against growth-sensitive currencies.

Ed Yardeni, a veteran on Wall Street who has long been bullish on the US stock market and founder of the renowned investment firm Yardeni Research, mentioned that due to the Fed unexpectedly cutting rates by 50 basis points last week to kick off a loose cycle, the US stock market may see a 'melt-up' trend due to rapid easing – a situation where the market surges continuously to reach historical highs, similar to the late 1990s internet bubble.

Ed Yardeni also mentioned that if the Federal Reserve and other global central banks do not take a cautious stance, it could lead to a rapid return of inflation. He stated that the Fed's latest policy decision has increased the likelihood of a stock market 'melt-up' from 20% to 30%. The best explanation for 'melt-up' is the period of the internet bubble in the late 20th century.

An institutional brokerage client report from Goldman Sachs shows that stimulated by the expected 50 basis point rate cut by the Federal Reserve, hedge funds bought US technology and media stocks at the fastest pace in four months last week. The anticipated rate cut is expected to rejuvenate industrial spending, make it easier for companies to borrow at lower costs, and enable consumers to purchase tech products, all of which may benefit stock prices in this industry.

On Tuesday's economic data front, the Conference Board's Consumer Confidence Index for September will be announced.

In recent years, China announced its boldest and most extensive monetary stimulus and real estate market support measures, including reducing the bank reserve requirement ratio and providing at least 800 billion yuan (approximately $114 billion) in liquidity support.

Key sectors & stocks

Growth tech stocks rose across the board, with tesla and salesforce up over 2%, nvidia up over 1%, micron technology and AMD up nearly 1%; Meta Platforms down nearly 1%.

China concept stocks surged, with bilibili up more than 12%, jd.com up more than 9%, li auto inc and pdd holdings up more than 7%, alibaba up more than 6%.

China assets etf in the USA saw an expanded increase,$Direxion Daily FTSE China Bull 3X Shares ETF (YINN.US)$ surging over 18%, $Direxion Daily CSI China Internet Index Bull 2x Shares ETF (CWEB.US)$ rising nearly 14%, $KraneShares CSI China Internet ETF (KWEB.US)$ Increased by nearly 7%. $iShares China Large-Cap ETF (FXI.US)$ Rise by more than 6%.

$Tesla (TSLA.US)$ Rising over 2% again, closing up nearly 5% yesterday.

$Li Auto (LI.US)$ Surged over 7%, sold over 12,000 units last week, with weekly sales surpassing Mercedes-Benz, BMW, and Audi.

$Taiwan Semiconductor (TSM.US)$ Rising more than 2%, Goldman Sachs raised the target price for Taiwan stocks and reiterated a "shareholding" rating.

$Visa (V.US)$ Falling nearly 4%, facing an antitrust investigation by the US Department of Justice involving debit card business.

Editor / jayden