Caterpillar gains over 3% on China stimulus, Fed speakers

Caterpillar (CAT) stock sailed to a new all-time high on Thursday as the broad market gained ahead of Federal Reserve (Fed) Chair Jerome Powell’s highly-watched speech. Additionally, Fed speakers Lisa Cook and Neel Kashkari are both featured speakers.

The market is looking for more clues about the November 7 interest rate decision. The central bank has pointed to 50 bps of cuts over the final two meetings this year, but the CME FedWatch Tool supplies 51% odds of a 50 bps cut in November before leveling off to 25 bps in December.

While the S&P 500 and NASDAQ are both somewhat muted, the Dow Jones Industrial Average (DJIA) has advanced half a percentage point at the time of writing.

Caterpillar stock news

Caterpillar stock is the best-performing stock in the Dow Jones on Thursday, advancing 3.5% at the time of writing. This owes in part to China’s announcement on Wednesday that it would attempt to stimulate the economy, particularly in the real estate industry.

Caterpillar produces plenty of equipment options for the mining and construction industries that should see heightened demand from a stimulus push.

The Chinese government said it will ease borrowing rates via central bank policy and pledged to provide direct stimulus that should affect major industries. China’s economy has been reeling since the covid pandemic, and anemic government supports are now being tossed out in favor of much stronger strategies.

Chinese equities have performed better this week than in any other week in the past decade, and mainland China stocks markets have risen for eight straight sessions.

This is a sudden shift in sentiment for Caterpillar. It was just last month that Hazeltree named CAT stock the sixth most-shorted stock among its contemporaries for August.

Earlier this month, Oppenheimer named Caterpillar stock as one most likely to benefit from a Republican Party sweep in the November US election season.

Caterpillar stock chart

Caterpillar stock reached an all-time high of $397.22 early on Thursday. This is just below the $400 psychological level, and that is where bulls will attempt to push next.

Caterpillar has a forward price-to-earnings ratio of just 17, so shares of the industrial have the ability to advance without much pushback.

Until this week, CAT stock was stuck beneath the $362 to $369 supply zone, as well as the resistance from this spring near $381. With both of those resistance points behind it, CAT could spiral higher. If the distance between $369 and the August 5 low at $307 is added onto $369, we get a target price of $431.

Support sits far below in the $340 and $330s from the 50-day, 100-day and 200-day Simple Moving Averages (SMAs).

CAT daily stock chart