To The Moon

Wednesday’s stock market trade started on a downbeat note after the release of the August Consumer Price Index (CPI).

The August CPI came in at 0.2% same as the consensus and previous, but we saw an increase of August Core CPI which came in at 0.3% higher than both consensus and previous of 0.2%.

The CPI report started to trigger selling interest due to the understanding that core-CPI, which excludes food and energy, remained above the Fed's 2.0% target at 3.2% year-over-year.

We also saw the Weekly MBA Mortgage Applications Index came in at 1.4% lower than the previous at 1.6%. The important note of the report has investors understanding that core inflation is sticking stubbornly above the Fed's inflation goal of 2.0%, which is oriented around the PCE Price Index.

The elevated core reading on a monthly and annual basis will be a focal point for the Fed and a likely reason to keep a September rate cut capped at 25 basis points.

On Thursday (12 Sep) we are expecting the following economic data which might further enhance the likely reason that Fed might capped the September rate cut at 25 basis points.

Indices was down after CPI Before Turnaround in PM session

After the CPI report came out, we saw the S&P 500 was down as much as 1.6%. The Nasdaq Composite was down as much as 1.4%. The Russell 2000 was down as much as 1.9%. The Dow Jones Industrial Average was down as much as 1.8%.

The market managed to stage a turnaround, leaving the major indices near session highs.

The S&P 500 logged a 1.07% gain. The NASDAQ rose 2.17%, propelled by strength in the semiconductor space and mega cap stocks. The DJIA and Russell 2000 logged slimmer gains

Indices Have Significant Gains This Week

This week's gains range from 1.3% to 4.2% in the three major indices. The recovery kicked into gear when the S&P 500 held above last Friday's low (5,402) on the initial retreat. Positive price action was helped by strength in NVIDIA (NVDA) along with other semiconductor and mega cap shares.

Mega Cap and Semicon Stocks Power S&P 500 Sector

We saw many stocks participated in the afternoon rally which has helped equal-weighted S&P 500 closed 0.1% higher and six of S&P 500 sectors closed with gains.

The information technology sector closed +3.25% coming in as the best performer by a significant margins. Next, we saw consumer discretionary sector also rise by +1.32% showing strength.

Both $Vanguard Mega Cap Growth ETF(MGK)$ and $iShares Semiconductor ETF(SOXX)$ was also up by +2.1% and +4.9% respectively.

The energy and consumer staples sector was the biggest decliner with -0.93% and -0.88% respectively.

Note Yield Higher Despite Choppy Action

We saw the treasury yields in choppy action after the CPI report release. The 10-year note yield went from 3.61% to 3.668% and settled one basis point higher on the day at 3.668%.

The 2-year note yield went from 3.55% to 3.69% and settled eighteen basis points higher on the day at 3.666%

Stocks To Watch

OpenAI, backed by Microsoft (MSFT), is in discussions for a $6.5 billion funding round from investors, potentially valuing the artificial intelligence startup at $150 billion. This would nearly double its valuation from earlier this year. Additionally, OpenAI is negotiating a $5 billion revolving credit facility with banks. Thrive Capital is expected to lead the funding round, with Microsoft participating. Apple (AAPL) and Nvidia (NVDA) have also shown interest in investing in OpenAI.

Nvidia (NVDA) may soon be allowed to export its AI chips to Saudi Arabia, as the U.S. government is close to lifting restrictions. This development follows Saudi Arabia's efforts to meet U.S. security requirements after Nvidia's chip shipments were limited earlier this year due to concerns over the country's ties with China. The Gain summit in Riyadh saw participation from other AI players like Alphabet (GOOGL) and Qualcomm (QCOM).

Goldman Sachs (GS) CEO David Solomon suggested that the Federal Reserve might cut interest rates by 25 basis points in the upcoming Federal Open Market Committee meeting. However, he also mentioned a low probability (around 30%) for a 50-basis-point cut, citing a weakening labor market as a potential trigger for a more significant rate reduction.

$SentinelOne, Inc(S)$ CEO Tomer Weingarten reported increased interest in the cybersecurity firm following a security incident at CrowdStrike (CRWD) in July. Weingarten mentioned that many affected parties are looking to either add another layer of security or completely switch to SentinelOne's services.

If we looked at the technical from MTF, S is below the long term MA, which might mean that we need to be cautious on this stock as there might be weakness on S, investors might consider taking a position now for low price target, but S need to clear above the long term MA.

$Rivian Automotive, Inc.(RIVN)$ saw its stock rise following updates at investor conferences. CEO RJ Scaringe mentioned supply chain issues affecting production rates, while CFO Claire McDonough discussed ongoing efforts to resolve these challenges. The company is currently focusing on ramping up production for its R1T and R1S models.

For RIVN, the stock rise is still not enough for the MTF as it is trying to clear the short term MA but it need to clear the long term MA before we can see a clear upside for longer term.

Roku (ROKU) is expected to report third-quarter results ahead of consensus, driven by gains in linear TV, programmatic efforts, and strong execution on new products. Cleveland Research noted that Roku's outlook appears constructive, with growth expected from new advertisers and lower CPMs.

$Starbucks(SBUX)$ continued to rally following a strategy update from incoming CEO Brian Niccol. TD Cowen analysts believe Niccol is focusing on the right drivers for improving traffic and store operations, with a commitment to digital menu boards and SKU rationalization.

For Starbucks, it is showing a clear signal for upside from the MTF, as it is trading well above the long and short term MA, and we could still be seeing more upside from SBUX.

Albemarle (ALB) led gains among lithium miners following a report that China's CATL might suspend some lithium production operations. This could remove significant supply from the market, benefiting companies like Albemarle and SQM (SQM).

Summary

I think tech stocks are returning to normalcy, ahead of the Fed meeting for rate cut decision, we should be seeing a small correction maybe end of week. But we could be seeing a rally starting next week after the Fed meeting.

So this week might still be a good time to load some of the mega cap and tech stocks.

Appreciate if you could share your thoughts in the comment section whether you think market would continue its short rally after the Fed meeting.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.