Stock Market Rebound Expected as Market Remains Oversold | Presidential Debate Analysis and Market News

Robust Rebound Expected in Stock Market

Most major stock market indexes experienced significant gains of 4% or more last week, marking a strong rebound and reaching break-even status for the first half of September. This trend is expected to continue this week, driven by the market’s oversold condition. It is worth noting that fundamentally superior stocks tend to bounce back quickly, resembling fresh tennis balls, while fundamentally inferior stocks struggle to recover, resembling rocks.

Presidential Debate Highlights Energy Policy and Border Chaos

The recent presidential debate exceeded expectations, particularly in the discussions surrounding energy policy and border chaos. Both candidates appeared to be appealing to Pennsylvania voters, as the candidate who secures victory in energy-rich Pennsylvania is likely to win both the electoral college and the presidency. This underscores the importance of energy issues in the upcoming election.

Serious Risk of World War III

During the debate, the topic of World War III was raised, with President Trump expressing concern about the potential for a global conflict. However, Kamala Harris did not seem interested in pursuing this issue, instead focusing on the Ukrainian conflict. It is crucial to address the threat of a major war before it escalates further, as the pursuit of “total victory” over Russia could have devastating consequences, potentially resulting in millions of casualties.

Retail Sales Report Indicates Mixed Performance

The Commerce Department reported that retail sales rose 0.1% in August, slightly better than economists’ consensus estimate of a 0.2% decline. However, when excluding vehicle sales and gas stations, retail sales only increased by 0.2%, falling short of the estimated 0.3% growth. Notably, online sales saw a significant increase of 1.4% in August, contributing to the overall improvement in retail sales. However, the fact that only 5 out of the 13 surveyed categories experienced growth suggests a less impressive retail sales report.

Anticipating the Federal Open Market Committee Statement

The upcoming Federal Open Market Committee (FOMC) statement on Wednesday is highly anticipated. In addition to the statement, the FOMC members’ interest rate forecasts, known as the “dot plot,” will be released. It is expected that the dot plot survey will forecast three key interest rate cuts in 2024 and another three in 2025. The decline in Treasury yields over the past month, combined with weak economic news, may result in a 0.5% cut in the Fed key interest rate.

Nvidia’s Record Sales and Earnings

Nvidia, a leading technology company, has experienced an overwhelming demand for its Blackwell chips. The CEO, Jensen Huang, revealed that some customers have become “emotional” due to the high demand. The company has received significant orders from Google, Meta, Microsoft, and Oracle, with the latter taking orders for the first “Zettascale” AI supercomputer, powered by up to 131,072 Nvidia Blackwell chips. This surge in demand positions Nvidia for record-breaking sales and earnings well into 2025.

Natural Gas Power Plants Fuel AI Data Centers

As the AI boom drives the need for new cloud computing centers, Bloomberg highlights the necessity of natural gas-fired power plants to meet the power demands of these data centers. Although there is opposition from environmental groups like the Sierra Club, due to concerns about methane emissions, natural gas remains a cost-effective option in the United States. Texas, Oklahoma, Kentucky, and Missouri are among the states developing major natural gas power plants, while seven other states are also involved in such projects.

Tensions Rise Between NATO and Russia

British Prime Minister Keir Starmer engaged in talks with President Biden regarding the use of NATO weapons against Russia. In response, Russian President Vladimir Putin warned that lifting restrictions on long-range missiles for Ukraine would be considered an “act of war.” This escalation raises concerns about the possibility of World War III, especially as Ukraine seeks to mount further attacks on Russia. The outcome of these discussions remains unknown, but it is evident that caution is being exercised in light of Putin’s warning.

EU Urged to Embrace Innovation and Productivity Growth

Mario Draghi’s report to the European Union emphasizes the need for the EU to adopt the example set by the United States in terms of productivity growth and innovation. The report highlights the lack of EU companies with market capitalizations exceeding 100 billion euros, in contrast to the numerous trillion-dollar companies in the US, such as Alphabet, Apple, Meta, Microsoft, and Nvidia. Draghi argues that the EU must not remain stagnant in old industries but must embrace technological advancements. This report has sparked controversy within the EU, as it forces them to confront the truth about their economic performance.

German Economic Sentiment Plunges

The ZEW Economic Sentiment survey revealed a significant drop in German economic sentiment, with the index falling to 3.6 in September from 15.6 in August. This decline raises concerns about the largest economy in the EU, prompting a reassessment of current practices. The EU must address the challenges it faces to ensure a more stable economic future.

Overall Market Trend Remains Positive

Despite some worrisome indicators relating to job growth and consumer strain, the stock market continues to exhibit resilience, quickly recovering from short-term selloffs. As the Federal Reserve eases its monetary policy, businesses can expect relief in the form of lower loan and mortgage rates, which will support hiring and construction. The positive market trend suggests that any near-term corrections should be viewed as buying opportunities.

In conclusion, the stock market is poised for a robust rebound, driven by the oversold condition. Energy policy and the risk of World War III have emerged as crucial topics in the presidential debate. The retail sales report indicates mixed performance, with online sales showing the most significant improvement. The upcoming FOMC statement and dot plot survey are highly anticipated, potentially signaling interest rate cuts. Nvidia is experiencing unprecedented demand for its Blackwell chips, ensuring record sales and earnings. The AI boom necessitates the development of natural gas power plants to meet the energy demands of data centers. Tensions between NATO and Russia are escalating, increasing the risk of a global conflict. The EU is urged to prioritize innovation and productivity growth, while the German economy faces challenges. Despite these factors, the stock market remains positive, offering buying opportunities amidst short-term corrections.