Market Overview
On Monday, the S&P 500 Index (S&P 500: $SPX, ETF: SPY) closed up by +0.21%. The Dow Jones Industrials Index (Dow: $DOWI, ETF: DIA) rose by +0.25%, while the Nasdaq 100 Index (Nasdaq 100: $IUXX, ETF: QQQ) increased by +0.46%. Additionally, September E-mini S&P futures (ESU25) rose by +0.25%, and September E-mini Nasdaq futures (NQU25) increased by +0.49%.
Market Dynamics
Stocks finished higher on Monday due to expectations of a more accommodating Federal Reserve. The 10-year Treasury note yield fell to a 5-month low of 4.04%. Markets are fully anticipating a 25 basis point rate cut by the Fed at next week’s Federal Open Market Committee (FOMC) meeting, with a 10% chance for a larger 50 basis point cut. The tech sector, driven by strong performance in semiconductor companies, contributed to the market’s upward movement. Upcoming US CPI and PPI reports will provide insights into the Fed’s ability to lower interest rates and support the job market.
Trade Concerns
Recent trade data from China raised concerns about global growth, as August exports grew by only 4.4% year-on-year, below the 5.5% projection. Imports rose by just 1.3%, falling short of expectations. This week, the market will closely watch any developments regarding trade or tariffs. Important reports due include annual revisions of US payroll data, and CPI and PPI figures expected on Wednesday and Thursday.
Fed Rate Outlook
The markets are now assigning a 15% probability to the possibility of a 50 basis point rate cut at the upcoming FOMC meeting on September 16-17, a shift from prior expectations of no chance. Following the anticipated 25 basis point cut, the odds for a second cut at the October meeting have risen to 81%. Overall, the market is forecasting a total reduction of 76 basis points in the federal funds rate by year-end.
Global Market Performance
International equities also closed positively on Monday. The Euro Stoxx 50 finished up by +0.84%, China’s Shanghai Composite rose by +0.38%, and Japan’s Nikkei Stock 225 climbed to a 2.5-week high with a +1.45% gain.
US Stock Highlights
Chip stocks such as Marvell Technology and Broadcom experienced notable gains, each rising over 3% following news of a collaboration with OpenAI. AppLovin saw a surge of more than 11% after being announced as a replacement for Caesars Entertainment in the S&P 500. Meanwhile, EchoStar rose by over 18% after a major deal with SpaceX’s Starlink. Conversely, CVS Health Corp fell by over 3% after a lackluster presentation to investors.
On the date of publication,
Rich Asplund
did not hold positions in any mentioned securities.
All information is for informational purposes.
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