Why Momentum, Fed Liquidity, & Tech Beats Signal More Upside

Strength Begets Strength

“A body in motion stays in motion.” ~ Newton’s First Law of Motion

On Wall Street, one of the best predictors of momentum, is past momentum. Thanks to OddStats (@OddStats), we have the data to back up the claim. “QQQ finished the first 150 days of 2026 with a return of +17.7%. There have been 8 years in history where it was up at least that much at this point.” Here’s how it did FROM THERE to the end of the year:

+20.8%

+16.5%

-0.6% (2012)

+15.6%

+8.2%

+16.5%

+16.1%

+10.5%

Rate Hike Odds Plunge

“Earnings don’t move the overall market; it’s the Federal Reserve Board…focus on the central banks, and focus on the movement of liquidity…most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.” ~Stanley Druckenmiller

Until last week’s jobs number, Wall Street investors were pricing in a September rate hike amid inflationary concerns stemming from heightened energy prices tied to the U.S.-Iran War. However, payrolls registered an extreme 5-sigma miss on Friday, plunging 23k versus Wall Street estimates of +80k.

As a result, the weak jobs number means that Federal Reserve Chair Kevin Warsh is far less likely to hike interest rates. The odds of a September rate hike plunged on online betting markets such as Polymarket.

Post-Earnings Breakouts

Several mega-cap tech stocks beat earnings estimates and are breaking out. For instance, SpaceX (SPCX) trounced Zacks Consensus Estimates by 65.38% in its first earnings report as a public company.

Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL) each reported earnings that beat Wall Street expectations, underscoring the strength of their ongoing multi-billion-dollar CapEX push. In late July, AMZN shares jumped 15% after reporting earnings as trading volume swelled to 150% above the norm. Since then, shares have held the gap and traded sideways. Such robust price and volume action is indicative of institutional accumulation.

You can read more about Q2 earnings here.

Bottom Line

Between historical momentum trends, shifting Federal Reserve rate expectations, and earnings beats from market leaders, the current backdrop suggests a higher market.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research