Which ASX Stocks will Rally on the US Interest Rate Cut?

Following the recent interest rate cut by the US Federal Reserve, global markets have reacted strongly, with most major stock indices rallying. In a move that caught some by surprise, the Fed cut rates by 50 basis points, exceeding the expected 25. This decision has broad implications, not only for global currencies but also for key commodities and sector-related stocks. Before diving into a few Australian stocks poised to benefit from this rate cut, it’s essential to grasp the broader impact of such a shift.

Why a US rate cut signals a positive outlook for stock markets

While the ASX may experience some volatility, a US rate cut generally signals a positive outlook for stock markets. Historically, when the US lowers rates outside of a recession, the S&P 500 has delivered average gains of 14 per cent within a year, with an 86 per cent chance of positive returns. The last time rates were slashed was during the 2020 COVID-19 pandemic, which marked a significant low, followed by strong rallies in both the US and Australian stock markets.

So, with expected bullishness moving forward, let's now turn to which ASX-listed companies could benefit from the US rate cut. Here are three worth watching closely.

Amcor (ASX: AMC)

AMC is a global packaging leader with substantial US operations. With much of its long-term debt denoted in US dollars, a rate cut eases financial pressures and opens capital for new investment. Technically, the stock recently broke through a key resistance level at $17. If it holds above this level, there’s potential to retest $19, offering double-digit upside.

James Hardie Industries (ASX: JHX)

JHX is which derives much of its revenue from the US. A stimulated American economy, bolstered by rate cuts, could support growth in the construction sector—a key market for James Hardie. The stock has been on a strong upward trajectory, setting new all-time highs in March. Currently, it’s bouncing off support at $46, and a decisive break above $56 could set it on a course to retest its record highs.

Qantas Airways (ASX: QAN)

QAN stands to gain from a weaker US dollar, which would lower its USD-denominated costs, such as fuel and aircraft leasing. Since its COVID-19 low in March 2020, Qantas shares have surged over 200 per cent, and a push to $8 seems increasingly likely now.

So while a US rate cut might spark short-term market fluctuations, it also presents valuable opportunities for investors ready to take advantage of these global shifts.

What were the best and worst-performing sectors last week?

The best-performing sectors included Financials, up 2.37 per cent followed by Utilities, up 2.31 per cent and Information Technology, up 2.20 per cent. The worst-performing sectors included Health Care, down 1.91 per cent, followed by Industrials, down 0.97 per cent and Consumer Staples, up 0.11 per cent.

The best performing stocks in the ASX top 100 included James Hardie, up 8.80 per cent, followed by Seek Limited, up 8.50 per cent and Reliance World Corporation, up 7.12 per cent. The worst-performing stocks included Computershare, down 9.73 per cent, followed by ALS Limited, down 7.91 per cent, and IGO Limited, down 7.24 per cent.

What's next for the Australian stock market?

The All Ordinaries Index climbed over one per cent last week, with buyers successfully pushing it past its all-time high of 8,375.80 points. This decisive move signals growing optimism in the Australian market, likely boosted by the recent US Federal Reserve rate cut.

Now that the All Ords is in uncharted territory, the key question is: what’s next? Some profit-taking could occur, which is typical when markets hit new all-time highs. In that case, it’s crucial to keep a close eye on the 8,168-point level, which has recently become a strong support zone. If the index breaks below that, the next major support level is around 7,900 points.

On the upside, there’s an interesting pattern to note. Back in March, the market broke above its previous all-time high of 7,956.30 points, gaining 2.65 per cent before settling into a six-month sideways trend. A similar pattern emerged after breaking the 8,168-point all-time high set in early April, with the index rising 2.6 per cent before pulling back. If this trend continues, the next target is around 8,600 points—2.6 per cent above the recent all time high of 8,375.80 points set in August.

Adding fuel to the bullish outlook, the three largest miners—BHP, Rio Tinto, and Fortescue Metals—are showing renewed strength. If their momentum continues and financial stocks follow suit, the market could see a significant rally. As I stressed last week, now is the time to act. Apply your analysis and be ready to start adding stocks to your portfolio.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.