The stock market is in a strong bull run, with the top indices like the S&P 500, Dow Jones, and the Nasdaq 100 hovering at their all-time highs. This article explains why ETFs like S&P 500’s VOO and SPY, Dow Jones’s DIA, andthe Nasdaq 100’s QQQ are soaring.
VOO, SPY, DIA, QQQ ETFs jump ahead of Fed cuts
The main reason why the top stock indices and their ETFs like DIA, SPY, DIA, and QQQ are soaring is that the Federal Reserve will likely cut interest rates in its next week’s meeting.
Recent economic numbers support this view, with consumer confidence falling and the unemployment rate going up. Data published last week showed that the jobless rate rose to 4.3% in August as the economy created just 22,000 jobs.
Consequently, the odds that the Fed will cut interest rates by either 0.25% or 0.50% have jumped on Polymarket and other prediction sites. These cuts will continue into 2026 when Donald Trump will replace Jerome Powell as the Fed Chair.
Rotation from bonds to stocks
The Dow Jones, Nasdaq 100, and the S&P 500 have also soared as the hopes of a Fed cut have brought bond yields much lower. Data shows that the 10-year yield dropped to 4.03%, its lowest level since April and much lower than the year-to-date high of 4.8%.
The ten-year has formed a death cross pattern as the 50-day and 200-day Weighted Moving Averages (WMA) crossed each other. Therefore, it will likely continue falling in the coming weeks, potentially to the key support at 3.862%.
The 30-year yield has also been in a downtrend, falling to a low of 4.66%, its lowest point since April. It is about to form the death cross pattern, which may lead to more downside.
Historically, investors normally rotate from the bond to the stock market when yields plunge.
Stock market rallied after strong earnings
Furthermore, the stock market is surging due to the recent strong earnings that have defied the previous pessimism. FactSet data shows that the second-quarter earnings growth was about 11%, the third consecutive quarter of double-digit expansion.
Before these results, most analysts were expecting the earnings growth to be in the low single digits. A good example of the strong earnings came from Oracle, which predicted that its AI revenue would hit $144 billion by 2030.
Other top companies like banks and technology names like Nvidia, Meta Platforms, and Google, also published strong financial results recently.
AI tailwinds are still boosting stocks
The top ETFs like QQQ, SPY, and DIA are also thriving because of the ongoing artificial intelligence tailwinds. Nvidia, the biggest name in the sector published strong financial results even as the US banned China shipments.
Most recently, Broadcom released strong numbers and inked a multi-year partnership with OpenAI. Other companies in the sector, like Microsoft and Amazon, have also published strong results.
Meanwhile, the stock market rally happened because of Donald Trump’s tariffs. Trump added major tariffs on goods from major countries, including a 50% on India and Brazil.
These tariffs are bad for business. However, the fact that they have been finalized is a good thing as it has led to more certainty in the market. Most notably, two courts have ruled that the tariffs are illegal, meaning that there is a slim chance that the Supreme Court will uphold the ruling.
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