Tech stocks weighed on the Nasdaq on Monday as investors opted for a cautious approach ahead of the Fed’s monetary policy decision due on Wednesday. Most traders are pricing in a steep drop in borrowing costs.
Tech Stocks Fall
Apple (NASDAQ: $AAPL) fell 2.78% on Monday, weighing heavily on the Nasdaq Composite. The drop comes after analysts pointed out that demand for the iPhone 16 came in below expectations.
Concerns over a slowdown in demand also weighed down chipmakers, with Nvidia (NASDAQ: $NVDA) sinking by 1.95%, Micron Tech (NASDAQ: $MU) down 4.43%, and Broadcom (NASDAQ: $AVGO) down by 2.19%. During the Monday trading session, the Nasdaq Composite lost 0.52% or 91.85 points to 17,592.13.
Investors were also reacting to news from Sunday that there had been another attempt on Republican presidential candidate Trump. Shares of Trump Media (NASDAQ: $DJT) fell 3%.84% at the close of trading on Monday. Restrictions on the sale of DJT shares will be lifted next week, although Trump has stated he will not sell his stake.
How Fed Decision Could Affect Markets
The Personal Consumption Expenditures Price Index (PCE), which is the Fed’s preferred gauge of inflation, is currently at 2.5%, just above the preferred level of 2%. Its upcoming decision will aim to calibrate interest rates to the strength of the financial system.
If the Fed cuts its rate by 50 bps and states that it is doing so to ensure a soft landing, this will be a positive for investors. However, if there are hints that the decision was taken as a measure to stave potential disaster on the horizon, it could lead to a huge selloff on the stock market.
How Lowering Rates Could Impact The Economy
Low interest rates also have a positive impact on the job market and can create demand that the market cannot supply. That often leads to inflation, which is what happened after the pandemic. It forced the Fed to raise inflation, with the new easing cycle expected to help grow the economy.
While a soft landing looks promising, all expect one of the Fed’s past nine tightening cycles have ended in a recession. For consumers, it is likely that interest rates will fall enough to provide meaningful relief for borrowers. Consequently, it could be some time before the impact of the Fed easing cycle is felt in the broader economy.
How Should You Invest In The Face Of A Looming Fed Policy Decision?
The Fed has previously stated that it does not expect more than three cuts in 2024. As it grapples with monetary policy, it is important to avoid a knee-jerk reaction in your investment strategy. Falling stock prices on the Nasdaq could be an opportunity to buy for those with a long-term investment strategy.
It is important to keep an eye on the bigger picture. Once the Fed cuts rates, it could stimulate growth and increase companies’ earnings. In the long term, ensuring economic growth and improving earnings has a positive impact on stock prices. However, in the medium term, it might not be a smooth ride.
Click Here For Updates on The Nasdaq – It’s FREE to Sign Up for Text Message Notifications!
Disclaimer: This website provides information about cryptocurrency and stock market investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for educational and informational purposes only. The owner of this website is not a registered investment advisor and does not offer investment advice. You, the reader / viewer, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.
