FX168 Financial News Agency (North America) #US Stock Market Review# Monday (September 16th) trading calm, Dow set a new high. Wall Street traders are preparing for the Federal Reserve's policy this week, continuing to push stocks higher.
The S&P 500 index rose 0.13% to close at 5633.09 points; the Dow Jones Industrial Average rose 228.30 points, up 0.55%, closing at 41,622.08 points, setting a new closing high. At the same time, the Nasdaq Composite Index, which is dominated by technology stocks, fell 0.52% to 17,592.13 points.
(Source: FX168)
(Source: FX168)
Rate cut expectations
The Federal Reserve is scheduled to hold a meeting on Tuesday and Wednesday, and the market generally expects the Fed to cut interest rates for the first time since the beginning of the rate hike cycle in March 2022. The interest rate cut this week will be a key move, as many investors hope that this decision will lower corporate borrowing costs and increase overall profit growth.
According to the FedWatch tool of the CME Group which measures the federal funds futures data, the market currently expects a 63% chance of a 50 basis point cut in interest rates by the central bank.
Before the Federal Reserve makes a decision, strategists from Morgan Stanley, Goldman Sachs, JPMorgan, and other companies have all stated that the impact of interest rate cuts on the stock market is not as significant as their impact on the health of the U.S. economy.
"Unless an unforeseen event occurs, interest rates are expected to be reduced this week," said Callie Cox of Ritholtz Wealth Management. "The impact of a rate cut (whether it is 25 or 50 basis points) on the economy may be negligible. The path and magnitude of rate cuts over the next year or so are the most important."
The difference between a half point cut and a quarter point cut may sound academic, but its impact can be profound. Rate cuts can relieve economic pressure but may also exacerbate inflation.
Michael Wilson of Morgan Stanley and other strategists believe that a half point cut by the Federal Reserve would be the most beneficial scenario for the stock market in the short term. However, the precondition is that the Federal Reserve can convince investors that it will not be forced to cut rates beyond normal levels due to concerns about economic recession and other factors.
For most of the past two years, technology giants such as NVIDIA and Microsoft have led the stock market's rise, attracting investors with their growing profits and focus on artificial intelligence.
Paul Nolte of Murphy & Sylvest Wealth Management said, "Since tech stocks peaked in July, the remaining '493 stocks' in the S&P 500 index have been the winners. Tech stocks seemed to have reached a point of exhaustion, but then they regained their market leadership, which has happened many times before as a 'false start.'"
John Stoltzfus of Oppenheimer Asset Management said, 'We are still bullish on the stock market. The extensive rotation that started with the rebound of the S&P 500 index from its low point last year has reversed volatility several times. The pullbacks experienced so far this year mostly appear to be 'trims' and 'reductions' of the S&P 500 index.'
Christopher Barto, a senior investment analyst at Fort Pitt Capital, said that many investors have been 'taking profits' from the surge in large-cap tech stocks over the past year, especially semiconductor stocks.
However, it is worth noting that a recent major brokerage report by Morgan Stanley shows that hedge funds have started buying large-cap tech stocks again. In contrast, defensive sectors have been net sold as funds trim their investments in real estate, healthcare, and utilities.
Bond market
The bond market saw a slight decrease in Treasury yields before the Federal Reserve meeting on Wednesday.
The yield on 10-year U.S. Treasury bonds dropped from 3.66% at the end of last Friday's session to 3.62%.
The yield on 2-year U.S. Treasury bonds, which is more closely aligned with the Fed's expectations, fell from 3.59% to 3.56%.
Lisa Shalett of Morgan Stanley Wealth Management said that as investors prepare for the start of the Fed's rate-cutting cycle, both stocks and bonds seem to be priced aggressively, but there are different views on future trends.
Focus stocks
Apple fell 2.78%, leading the decline in large-cap technology stocks, due to a warning from a highly-watched analyst that demand for the iPhone 16 Pro is lower than expected.
Nvidia fell 1.95%. It is one of the most influential stocks in the market, as it is one of the largest stocks by market cap.
Oracle rose 5.12%, leading the market. The software company has continued its strong momentum from last week's better-than-expected earnings report. Melius Research raised Oracle's rating from hold to buy, citing expectations of increased order backlog and continued success in the field of artificial intelligence, as well as accelerated growth in cloud computing revenue.
Intel rose 6.36%. According to insiders, Intel is officially eligible to receive up to $3.5 billion in federal funding after reaching a binding agreement with US officials to manufacture semiconductors for the Pentagon.
Alcoa, headquartered in Pittsburgh, rose 3.73%. The company will receive $1.1 billion in cash and stock from Saudi Arabian Mining Company in a deal involving the sale of its stake in two metal factories in northern Saudi Arabia.
Shares of Icahn Enterprises, owned by Carl Icahn, rose 14.54%. The company announced that a US judge has dismissed a class-action lawsuit against the company, based on allegations by a research firm that it sought to profit from alleged financial misconduct and stock price declines.
Mosaic, a fertilizer producer, fell 3.64%. The company cited electrical equipment failures at its mining operations and Hurricane Frances as reasons for a decrease in potassium and phosphate production for this quarter.