Traders on the floor of the New York Stock Exchange were greeted with a positive start to the week as the Dow Jones Industrial Average closed at a record high on Monday. The 30-stock index closed up 65.44 points, or 0.16%, at 41,240.52, marking a significant rebound from a steep sell-off earlier in the month. The day saw the index climb more than 200 points to set a new intraday record before pulling back slightly. The S&P 500 slipped 0.32% to 5,616.84, while the Nasdaq Composite sank 0.85% to end the day at 17,725.76.
Traders appeared to be rotating out of the tech sector and into other areas of the market, with the S&P 500 energy sector seeing gains of more than 1% while tech stocks fell 1%. Nvidia, a key player in the tech industry, closed down 2.3% ahead of its earnings report scheduled for Wednesday afternoon. Analysts and traders alike are closely watching this report as it is seen as a crucial event that could impact market sentiment and the overall direction of the bull market. Other chip stocks like Broadcom and Micron also saw declines.
Baird analyst Ross Mayfield highlighted the concerns within the technology sector, stating, “The market is in a pretty healthy place, but it is really hard to make big advances higher if tech is a laggard — it’s just too big of a weight in the index — and right now, it is acting like a laggard.” The market’s performance in August has been tumultuous, with concerns over a possible recession and the unwinding of a popular hedge fund trade linked to the Japanese yen causing stocks to retreat from their record levels. The S&P 500 experienced its biggest one-day loss since 2022 on August 5, shedding 3%, while the Dow plunged more than 1,000 points.
However, since then, optimism surrounding lower Federal Reserve interest rates and improving U.S. economic data has propelled stocks higher. The S&P 500 has surged 8% since August 5 and was nearing its record high set in mid-July, while the Dow has seen a more than 6% increase. The rebound has extended to the wider market, with the small-cap Russell 2000 also rising following positive comments from Fed Chair Jerome Powell.
Powell’s remarks laid the groundwork for potential interest rate cuts, a move that Wall Street has been eagerly anticipating. The prospect of lower borrowing costs has been welcomed by investors, especially in light of recent economic data that raised concerns about the health of the U.S. economy. While Powell did not specify the timing or magnitude of potential rate cuts, traders are unanimous in their forecast for a rate cut at the Fed’s September policy meeting, according to the CME Group’s FedWatch Tool.
“We think they’ll do 25 basis points in September, November, and December, because they want the market to know that they are not behind the curve, but at the same time, they want to ensure that they are not going too quickly into a cutting mode,” said Sam Stovall, chief investment strategist at CFRA Research. Overall, the market’s performance in recent weeks has been a rollercoaster ride, with investors closely monitoring economic indicators and central bank policies for clues about the future direction of stocks.
