The S&P 500 and Nasdaq Composite sank in what proved to be a mixed trading session for US stocks on Monday as investors took in Fed Chair Jerome Powell’s speech on Friday at the Hole Economic Symposium. The market is also waiting for Nvidia’s(NVDA) earnings report on Wednesday, followed by new inflation data on Friday.
S&P 500 and Nasdaq Slide On Monday
The S&P 500 and Nasdaq dipped 0.3% and 0.9%, respectively, driven by a decline in tech stock ahead of Nvidia’s (NVDA) earnings report on Wednesday. However, the Dow Jones Industrial Average achieved a new all-time closing high at 41,240.52 after gaining 0.16% during the session. Despite the slide, the S&P 500 is only 1% lower than its all-time closing high.
The big indexes were coming off huge gains on Friday in response to Jerome Powell’s speech, in which he signaled that interest rates may fall soon. With only three meetings left before the end of 2024, analysts wonder whether a 0.5% cut could happen.
Tech Stocks Slide
Tech stocks lagged during Monday’s trading session, with Nvidia leading the slide as it plummeted 2.3%, causing a broader fall among chip stocks. Broadcom (AVGO), a major chip stock, fell 4.05%, while Tesla (TSLA) fell 3.23%.
The biggest contributor was Nvidia (NVDA), a major growth driver for US stocks in 2024. With high expectations regarding its AI-powered growth, it has led to massive growth, and it now has a market cap of over $3 trillion. In June, it briefly surpassed Microsoft as the most valuable company globally.
Given its huge influence on market trends, a major decline was bound to affect the broader market. Other mega-cap tech stocks had a mixed performance, with Meta (META), Amazon (AMZN), and Microsoft (MSFT) sliding, while Alphabet (GOOGL) and Apple (APPL) were up slightly.
Treasury Yields And Oil Rises
Yields on 10-year Treasury Notes fell on Friday, and Powell’s remarks were up to 3.82% at the end of the trading session. Meanwhile, oil was up around 3% after reports of production shutdowns in Libya and rising tensions in the Middle East.
Gold also gained some ground, reaching around $2,555m near record highs, while BTC fell slightly to around $62,500.
Impact Of Fed Rate Cuts On The Stock Market
With Jerome Powell indicating that rate cuts will occur in September, analysts forecast the Fed will implement a 25-basis point cut. When the Fed cut rates in the past due to a weakening economy, it was not good for the stock market.
For instance, in 1989, when the Fed cut rates, the S&P 500 gained 11% a year after the first cut. However, when the economy went into recession the next year, the S&P 500 lost nearly 14% of its value in the next 12 months.
It signals that if the Fed cuts rates due to a weak economy, it could negatively impact the stock market.
Is Now The Time To Get Into The Stock Market
Monday’s decline could potentially be a great buy opportunity for investors. When investing in stock, maintain a watch list to help you spot opportunities as they arise in the stock market. It is also important to keep up with developments across the stock market.
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