Investors weigh Fed moves, market reacts unevenly
US stocks were mixed on Monday, with the S&P 500 posting small gains while the Nasdaq slipped significantly as Big Tech stocks slid. Investors turned their attention to the upcoming US Federal Reserve meeting, where they are expected to decide on an interest rate hike.
Tech is on the retreat
The tech sector, which has been the leader in the S&P 500 all year, suffered the biggest losses. The S&P tech index lost 0.95%, the biggest decline among all 11 major sectors on the day.
A major contributor to the decline was Apple, whose shares fell 2.78%. This led to significant weakness in both the S&P 500 and the Nasdaq Composite. The reason for this decline was the forecasts of analysts at TF International Securities, who reported weaker-than-expected demand for the new iPhone 16 lineup.
Chipmakers under pressure
Apple was not the only one feeling the negative market sentiment. Chipmakers also suffered. Nvidia, whose shares showed the best result in the S&P 500 for the year, lost 1.95%. Broadcom fell 2.19%, while Micron Technology fell 4.43%. This led to a 1.41% decline in the Philadelphia SE Semiconductor Index.
Investor Strategies: Quick Sells in Giant Stocks
Ken Polcari, chief market strategist at SlateStone Wealth, noted that tech giants are often the first choice for sale when investors need to raise capital quickly. "If people want to raise money quickly, they sell big companies like Apple, Nvidia, Amazon, or Microsoft. You can do it quickly and with minimal risk to your portfolio," Polcari explained.
Financials Frozen in Anticipation of Fed Decisions
Investors continue to watch the Federal Reserve's actions, expecting further monetary tightening to impact markets in the coming days.
Unstable Expectations Ahead of Fed Meeting
Markets are showing mixed results ahead of the US Federal Reserve's (Fed) decision. Investors are playing it safe, looking to protect their assets and prepare for possible changes in monetary policy.
"They want to have reserves to act in case of uncertainty related to the Fed's decision," experts comment.
Dow Jones rises and Nasdaq weakness
On Monday, the Dow Jones Industrial Average rose by 228.30 points, which is equivalent to an increase of 0.55%, and reached 41,622.08. At this time, the S&P 500 also slightly increased by 0.13%, rising by 7.07 points to 5,633.09. In contrast, the Nasdaq Composite suffered losses, falling by 91.85 points, or 0.52%, to 17,592.13.
Tech Sector Turns Down
Of the 11 key S&P 500 sectors, only tech and consumer discretionary posted negative dynamics. Tech stocks continued to slide under pressure, partly due to volatility amid expectations of the Fed decision. At the same time, financial companies rose by 1.22%, and the energy sector rose by 1.2%, leading the day's performance.
Betting on Fed Easing
Markets have shown positive dynamics since the beginning of the year, thanks to expectations that the Fed will ease its monetary policy. At the same time, economic indicators suggest that the US economy may be able to avoid a recession, adding to optimism among market participants.
The Dow Jones ended the day at a record high, while the S&P 500 index remains within 1% of its all-time high reached in July of this year.
Fed Rate Cut Forecasts
The market remains on hold for the outcome of Wednesday's Fed meeting. Expectations for a possible rate cut continue to fluctuate. The chance of a 50 basis point rate cut is now 59%, according to CME's FedWatch tool.
Intel Gets Government Support
Intel Corp shares soared 6.36% after a report said the company would receive $3.5 billion in federal support. The funds will be used to produce semiconductors for the U.S. Department of Defense. The news not only strengthened Intel's position in the market, but also became an important step in ensuring the country's national security through the development of the semiconductor industry.
Boeing Suspends Hiring Amid Strike
Meanwhile, Boeing shares fell 0.78%, which is due to the ongoing strike by the company's workers. The aircraft manufacturer said it will suspend hiring and consider temporary furloughs for current workers if the strike continues in the coming days. This creates additional difficulties for the company, which is already under pressure due to the difficult economic situation.
Investor confidence is growing
On the New York Stock Exchange, there is a significant advantage of stocks that showed growth over those that declined, with a ratio of 2.74 to 1. On the Nasdaq, the situation was also in favor of the "bulls", where advancing stocks outnumbered decliners by 1.17 times. These data highlight the overall optimism in the market, despite the negative impact of certain sectors.
New records amid expectations
The S&P 500 index recorded 88 new highs over the past 52 weeks and only one low, which indicates good investor sentiment. The Nasdaq Composite, in turn, showed 143 new highs and 83 new lows. These figures confirm that the markets continue to rise, despite the upcoming Fed decisions.
Trading activity is falling
Trading volume on U.S. stock markets amounted to 9.74 billion shares, which is slightly below the average of 10.75 billion shares over the past 20 trading days. The decline in activity can be explained by the expectation of the Federal Reserve meeting, the results of which may have a significant impact on the further movement of the market.
US indices under pressure from technology stocks
The technology sector continues to drag indices down, despite the overall growth in the market. At the same time, the US dollar reached its lowest level in more than a year in a pair with the Japanese yen, which is associated with increased expectations of easing monetary policy by the Fed at the upcoming meeting.
Expectations of interest rate cuts are growing
Investors and analysts are eagerly awaiting Wednesday, when the Federal Reserve will decide on interest rates. Expectations have increased: the Fed may cut rates by half a point, which is more than previously expected. This step is aimed at supporting the economy and preventing a sharp slowdown, while it is important to keep inflation under control and stabilize the labor market.
Markets watch Fed rhetoric
Kathleen Brooks, director of research at XTB, said market participants are focused less on the size of the rate cut and more on the rationale behind the Fed's actions.
"If a 50 basis point cut is accompanied by a statement of intent to provide a soft landing, that will be viewed positively by the market. However, if confidence weakens and signs of panic emerge, a sell-off may be inevitable," she said.
Dollar weakens amid market expectations
The dollar index, which tracks the dollar against six major currencies, was down 0.33% at 100.69. The dollar-yen pair was also under pressure, with the greenback down 0.13% at 140.63 yen. These fluctuations are related to expectations of a more accommodative Fed policy, which could lead to a further decline in yields on dollar assets.
Trump Media shares have lost their gains
News of a second assassination attempt on Donald Trump, the Republican presidential candidate, also attracted the attention of investors. On Sunday, shares of his company Trump Media & Technology initially rose in price, but by the end of the trading session on Monday they had fallen by more than 3%.
Restrictions on selling Trump Media shares will be lifted
The moratorium on selling Trump Media shares will be lifted over the next 10 days, which could add volatility to the market. However, Trump himself said on Friday that he does not plan to sell his shares, which could calm investors a little.
Hopes for easing monetary policy lift shares
In anticipation of a significant cut in the interest rate by the US Federal Reserve, shares continue to receive support, which is reflected in the growth of global indices. The MSCI All-World Index rose 0.20% to 828.55, confirming that optimism surrounding the Fed's actions has supported investor sentiment for months.
Bonds React to Market Expectations
Short-term U.S. Treasury yields hit their lowest in two years. Two-year yields, which are particularly sensitive to interest rate changes, fell 1.7 basis points on Monday, continuing a downward trend seen throughout September.
Longer-term bonds also fell. Ten-year yields fell for a second straight day, falling 3.1 basis points to 3.618% from 3.649% on Friday.
Rates and Probabilities: Traders Brace for Fed Decision
Traders are increasingly optimistic that the Fed will decide on a half-point rate cut at its meeting on Wednesday. Futures data showed the likelihood of that scenario rose to 59%, up from 30% a week earlier. Those expectations have changed sharply after media reports suggested more aggressive easing could be in the works.
Japan, UK central banks in focus
Other key central bank meetings are also in focus this week. The Bank of England and the Bank of Japan are set to discuss their next steps. The Bank of England is expected to leave interest rates on hold at 5.00% when it meets on Thursday. However, markets are still pricing in a further rate cut of 31%.
The Bank of Japan will announce its decisions on Friday. It is widely expected to keep rates on hold for now, but may hint at a possible tightening in October.
US data could have an impact
In addition to central bank moves, investors will be closely watching economic data from the US this week, including reports on retail sales and industrial production. These data could have a significant impact on the market, either strengthening or weakening expectations for the Fed's next steps.
Yen Strengthens as Bond Yields Fall
A decline in US Treasury yields supported the Japanese yen's strength against the dollar. The trend reflects investor caution as investors wait for the Fed to cut interest rates further. The euro also holds its own, remaining at $1.1200, thanks to expectations of a rate cut by the European Central Bank, which gives stability to the European currency.
Gold approaches record levels
Low borrowing rates have stimulated the growth of gold prices, which rose by 0.22%, reaching $2,582.39 per ounce. This level is approaching the historical maximum of $2,588.81, set earlier. The precious metal continues to attract investors as a safe asset amid uncertainty in global markets.
Oil prices on the rise after hurricane
Oil prices rose sharply amid the aftermath of Hurricane Francine, which led to a temporary halt of about 20% of oil production in the Gulf of Mexico. Restoring production will take some time, which caused an increase in the cost of oil on world markets.
Brent crude futures added $1.14, reaching $72.75 per barrel. US crude also rose, rising $1.44 to $70.09 a barrel. These changes could impact further energy price dynamics in the coming days.
Overall, the decline in bond yields, the strengthening yen and the rise in oil prices are indicative of current global economic trends, which are shaped by natural disasters and expectations of rate cuts from key central banks.
