Stocks Open Higher as Tech Shares Rebound; Inflation and Retail Sales Data This Week Are Key

U.S. stock indexes commenced the week on a positive note, driven by gains in the technology sector, notably Tesla Inc., which surged following an upgrade by Morgan Stanley. Investor attention was focused on forthcoming inflation data scheduled for release later in the week, with a keen interest in its potential impact on the Federal Reserve's monetary policy decisions.

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Here's the current state of stock indexes:

• The S&P 500 (SPX) advanced by 19 points, representing a 0.4% increase, reaching 4,477.
• The Dow Jones Industrial Average (DJIA) gained 122 points, or 0.4%, reaching 34,704.
• The Nasdaq Composite (COMP) climbed 88 points, equivalent to a 0.7% rise, reaching 13,850.

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It's worth noting that in the previous week, both the Dow, S&P 500, and Nasdaq had experienced declines.

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Several factors were contributing to the positive sentiment in the markets:

1. Technology Stocks: Technology shares, including Tesla, played a pivotal role in driving the broader market higher. Tesla shares surged by 6.2% following an upgrade by Morgan Stanley analyst Adam Jonas, who elevated the electric-vehicle manufacturer's stock rating from equal weight to overweight. This upgrade was largely influenced by Tesla's new machine-learning supercomputer, Dojo.
2. Federal Reserve's Outlook: A report in The Wall Street Journal suggested a shift in the Federal Reserve's perspective. The Fed now appears to emphasize the need for evidence of an accelerating economy to justify raising interest rates. This shift in stance regarding economic growth and inflation was noted positively by market participants.
3. Upcoming Economic Data: Investors were preparing for a busy week of economic data releases, particularly the August U.S. consumer-price index scheduled for publication on Wednesday and the August retail sales report due on Thursday. These data points are expected to influence the Federal Reserve's decision-making process at its upcoming policy meeting.

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Tom Lee, the head of research at Fundstrat, observed that if incoming data continues to show softer inflation, the Fed could potentially move away from its reliance on historical data and place greater emphasis on forward-looking indicators. He expressed confidence in the equity markets, anticipating a rise in the S&P 500 to 4,750 or higher by year-end.

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One notable contributor to recent market volatility has been the persistent increase in oil prices, heightening concerns about inflation at a time when major central banks were looking to conclude or finalize their interest rate hikes. Bond yields, which had briefly eased in late August, resumed an upward trajectory, with 10-year Treasuries hovering around 4.3% before stabilizing somewhat.

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Stephen Innes, managing partner at SPI asset management, commented on the impact of rising oil prices and bond yields on market dynamics, underscoring their influence on inflation concerns.

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