Over the past week, the three major U.S. stock indices have collectively risen.

The Dow Jones Industrial Average has accumulated a 2.6% increase, closing at 41,393.78 points; the Nasdaq Composite has accumulated a 5.95% increase, closing at 17,683.98 points; the S&P 500 has accumulated a 4.02% increase, closing at 5,626.02 points.

Zhang Antian, a senior macroeconomic analyst at the Research and Development Center of China Merchants Securities, told reporters from 21st Century Economic Report that the U.S. stock market saw a significant rebound last week.

In addition to the optimistic demand for Nvidia's new chip Blackwell, the rise in the Russell 2000 reflects a renewed warming of market expectations for substantial interest rate cuts and a soft landing scenario.

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Consumer sentiment has warmed, and the rebound in wage growth in August is beneficial to the actual disposable income of residents, with the University of Michigan's Consumer Sentiment Index also trending upwards.

Although the S&P 500 has returned to 5,600 points and has limited room for further upward movement, structurally, some sectors still have expected improvement space.

For example, the U.S. Treasury yield curve ended its inversion in the past two weeks, and the trend of stabilization and warming of net interest margin pressure in the banking sector is clearer.

Wang Xinjie, Chief Investment Strategist of the Wealth Management Department of Standard Chartered China, told reporters from 21st Century Economic Report that the recent stock market correction is a good opportunity to take positions in U.S. technology and financial stocks in segments.

With the rise in demand for data centers, software developers, and equipment manufacturers, the structural growth of the technology industry driven by artificial intelligence is still in its early stages, and Nvidia's strong guidance last week also confirmed this point.

U.S. financial stocks are also attractive, and it is believed that they will benefit from the steepening yield curve, the Federal Reserve's interest rate cuts driving non-interest income and loan growth, and a lower valuation compared to the overall market.

The Federal Reserve's interest rate guidance is the indicator that the market is closely watching this week.

"The U.S. money market expects the Federal Reserve to cut interest rates by more than 100 basis points by the end of this year, and a total of 255 basis points by the end of 2025, which means that there will be an interest rate cut of about 25 basis points at each of the 11 policy meetings before the end of next year."

Wang Xinjie said that if the Federal Reserve's guidance confirms this gradual pace of interest rate cuts, it may be beneficial to risk sentiment and the stock market.

However, if the Federal Reserve cuts interest rates by 50 basis points this week, it may cause panic in the market, leading to further short-term declines in bond yields and the U.S. dollar.

So far this year, the three major U.S. stock indices have collectively risen, with the Dow Jones Industrial Average accumulating a 9.83% increase, the Nasdaq Composite accumulating a 17.8% increase, and the S&P 500 accumulating a 17.95% increase.

Looking at the sectors, the U.S. technology industry outperformed the market in the first half of 2024, but has lagged behind since the second half.

The reason is the market's concern about the high valuation of the industry and doubts about how to quantify the huge investment in artificial intelligence and profit from it.

"After a round of strength in the technology sector, it is natural for there to be consolidation and volatility in the short term.

In the next 6 to 12 months, strong earnings growth is expected to be the main driver for technology stocks to rise."

Wang Xinjie said that under the impetus of artificial intelligence investment, capital expenditure in data centers is expected to continue until 2025, and high-end semiconductor manufacturers will face a situation of supply not being able to meet demand.

As governments and companies accelerate the exploration of artificial intelligence applications, the market still has the potential for further expansion.

Software applications are in the early stages of using artificial intelligence to improve productivity, and over time, manufacturers of smartphones, personal computers, and wearable devices should launch more features characterized by artificial intelligence.

These factors should drive the structural growth of the technology industry.

At the same time, the Federal Reserve's interest rate cuts will also help to ease valuation pressure.

Last week, U.S. bank stocks fell.

Some major U.S. banks said that the consensus on market profit expectations, especially expectations for net interest income next year, may be too optimistic.

However, Wang Xinjie pointed out, "The valuation of the U.S. financial industry is reasonable, with a forward price-earnings ratio of 15.4 times for the next 12 months, a discount of 25.8% compared to the overall market, which is consistent with the historical average discount level.

The recent adjustment is a good opportunity for investors to increase their holdings of major U.S. bank stocks, and it is expected that the U.S. financial industry will outperform the market in the next 6 to 12 months."

Wang Xinjie said that a soft economic landing will be beneficial to the U.S. financial industry.

If the yield curve (the difference between long-term and short-term bond yields) is steeper, it should help reduce any negative impact of Federal Reserve interest rate cuts.

In addition, the rebound in non-interest income is expected to offset some of the decline in net interest income.

This may be driven by the recovery of the investment banking industry from 2024 to 2025.

A soft landing in the U.S. economy and lower interest rates may also promote the growth of banks' loan scale.

Wall Street is looking forward to the Federal Reserve's policy meeting on September 17th to 18th, and the market generally expects the Federal Reserve to cut interest rates by 25 basis points at the meeting.

Currently, the Federal Reserve maintains the target range of the federal funds rate at 5.25% to 5.5%.

Federal Reserve Chairman Powell said last month that the Federal Reserve will "do everything possible to support a strong labor market while we make further progress towards price stability."

Data from the London Stock Exchange (LSEG) late last Friday showed that the market expects a rate cut of 115 basis points by the end of 2024.

In contrast, the Federal Reserve's forecast in June showed that there would be a rate cut of 25 basis points this year.

Federal Reserve Governor Waller said last Friday that he is "open to the magnitude and speed of interest rate cuts," and he would support a larger interest rate cut "if the data indicates it is necessary."

New York Federal Reserve President Williams said last Friday that the Federal Reserve is "in a favorable position" to achieve inflation and employment targets.

Zhang Antian told reporters from 21st Century Economic Report that Federal Reserve Chairman Powell's previous stance at Jackson Hole, "not wanting the labor market to cool down further," reflects his desire to ensure a soft landing and an open attitude towards a 50 basis point interest rate cut.

Federal Reserve Governor Waller also said that if he sees new data deteriorating, he would be biased towards front-end interest rate cuts.

Currently, the risk of the labor market cooling down is higher than the risk of inflation rebounding.

If Powell can influence the committee to form a consensus, there is a possibility of a substantial 50 basis point interest rate cut in September.

Wang Xinjie said, however, that the Federal Reserve may cut interest rates by 25 basis points in September, not 50 basis points.

The latest U.S. employment market and inflation data have significantly reduced the possibility of the Federal Reserve making a substantial 50 basis point interest rate cut for the first time this week, especially in the context of an unexpected increase in core inflation.

U.S. economic activity has clearly slowed down, but the job market has created an average of more than 116,000 jobs in the past three months, which does not match the market's current recession concerns.

At the same time, due to the surge in housing costs, the core inflation rate in August did indeed rise unexpectedly, with a sequential increase of 0.3%, but the annualized three-month average core inflation rate is still close to the Federal Reserve's 2% inflation target, while the overall annual inflation rate continues to slow down to 2.5% year-on-year.

However, forward-looking employment market indicators such as the job vacancy rate are softening.

If this situation continues, it will increase the urgency for the Federal Reserve to speed up interest rate cuts in the future.