Stocks Climb Slow and Steady, But Keep an Eye on What’s Next | September 27, 2024

It was a solid week for stocks, with risk appetite clearly showing. I’d rate it an A-, almost an A, except for some weakness in chipmakers as Nvidia pulled back to $120 and there was some selling on today. Overall, though, the market is in good shape. The trend is still up, moving higher at a healthy, steady pace.

Bitcoin is hanging after it bounced. It closed above the August level, which changes its outlook from cautious to neutral. There’s potential to test the upper end of the range now. It’s been in a down channel for months, but this is the first higher high within that channel. Closing and holding $65K is a positive sign. While the larger downtrend is still in place, it feels like a shift is happening.

China’s 50 basis point rate cut added fuel to the risk-on behavior this week. While it mainly boosted Chinese stocks, it also supports the broader bull rally. Central bank moves like this generally encourage risk-taking. The big question is whether it will help major U.S. tech names like Tesla and Apple, which have strong ties to China.

The chipmaker story is more complicated. If China pushes for domestic chip use, it could hurt companies like Nvidia. Nvidia couldn’t break out this week, falling back to 120, and the semiconductor ETF (SMH) also pulled back to its August high. So, no breakout or higher high for chipmakers yet, but the NASDAQ hit a higher high, and that’s what really matters.

Semiconductors are still key to the AI bull market, but their recent sideways movement is slowing the overall stock market’s rise. The good news is that other sectors are picking up the slack, so the market can keep climbing, even if it’s at a slower pace. I see this slower rise as healthy. The fact that many charts are hovering just below August highs is why I’d give this week an A- instead of an A.

Next week, watch the bond market. The 10-year yield dipped today, but it doesn’t seem like a big deal. Rising yields are likely what the stock market wants, especially as the Fed stays put. As long as the data, like next week’s jobs report, doesn’t disappoint, higher yields should keep stocks on track. If yields drop sharply, though, that could be a sign to stay cautious. Let’s see how things unfold.