A mix of caution and optimism drives US stocks

The US stock market has been on an uptrend this month with sentiment improving gradually in particular as traders consider the possibility of a less stringent monetary policy. Until now, the rapid rise in interest rates has impacted confidence and fueled concerns about a slowing economy.

In this regard, traders could monitor the Federal Reserve’s interest rates decision tomorrow and Jerome Powell’s speech for guidance and hints over the next step in monetary policy.

The publication of declining US inflation figures today, mostly along estimates, supported the expectations of a pause in interest rate hikes tomorrow. However, traders could remain cautious to a certain extent ahead of the decision. The Federal Reserve is still expected to potentially raise interest rates in July.

Despite some remaining concerns, technology stocks were driving the market and could continue to push it to the upside. The sector has been seeing strong earnings with many companies beating estimates. Oracle reaffirmed this trend on Monday as investors could look forward to future positive results.

The market’s interest in AI has also brightened the outlook for many tech companies, from chip manufacturers to software developers and cloud-computing providers. Artificial Intelligence is expected to help boost revenues for many tech companies while also helping improve efficiency in many other industries that could benefit indirectly.

Overall, the stock market could react positively if the US central bank keeps interest rates on hold as expected, in particular, if the institution adopts a more dovish tone. As a result, vulnerable companies and sectors could also find some breathing room to cope with rising financing costs.

Bas Kooijman, CEO and Asset Manager of DHF Capital S.A. added :

The technology sector is increasingly becoming a bright spot in the US stock market while investors are considering the economic pressures high interest rates create. Tech companies’ performance could contrast with that of global stock markets which remain exposed to the weaker economic performance in Europe as well as the slower-than-expected recovery in China.