On Monday, the Nasdaq Composite reached an all-time high while the Dow Jones Industrial Average experienced a decline, as investors position themselves ahead of the Federal Reserve's imminent monetary policy announcement and the anticipated corporate earnings report this week. The tech-centric Nasdaq saw an increase of 1.2%, closing at 20,173.9, while the S&P 500 rose 0.4% to 6,074.1.
Conversely, the Dow decreased by 0.3%, finishing at 43,717.5. Among the various sectors, consumer discretionary emerged as the primary gainer, whereas energy faced the most significant losses. The Federal Open Market Committee is set to initiate its two-day monetary policy meeting on Tuesday. Market participants largely expect a 25-basis-point cut to the benchmark lending rate on Wednesday, as indicated by the CME FedWatch tool.
This potential reduction would represent the second consecutive 25-basis-point cut, following a substantial 50-basis-point decrease implemented in September. However, insights from Saxo Bank reveal a growing speculation among analysts regarding the possibility that the Fed may forego a rate cut next month due to ongoing inflationary pressures in certain sectors and robust economic performance.
"With the new Trump administration likely to focus on trade tariffs early on after taking office on January 20, there is risk that it could create upside risks to inflation, which could make the Fed more cautious about future cuts," stated a report from the bank. In the bond market, the yield on the two-year treasury climbed by one basis point, reaching 4.25% on Monday, while the 10-year yield remained stable at 4.4%. Regarding economic data, US private-sector output increased at the fastest rate since March 2022 in December, despite a deepening contraction in manufacturing with a thriving service sector, based on S&P Global's flash purchasing managers' index.
Meanwhile, the New York Fed reported a more significant-than-expected drop in manufacturing activity for December, influenced by plummeting orders and shipments. In energy markets, West Texas Intermediate crude oil prices fell by 1%, closing at $70.59 per barrel on Monday. Later this week, significant companies including Accenture, Nike, Micron Technology, Cintas, FedEx, Lennar, General Mills, and Carnival are expected to release their latest quarterly earnings results. From the corporate sector, shares of Broadcom surged by 11%, marking the highest performance within both the S&P 500 and the Nasdaq.
Goldman Sachs raised its price target for the chipmaker's stock from $190 to $240. Honeywell International saw a 3.7% uptick, becoming the top gainer on the Dow, after announcing it is considering a separation of its aerospace division as part of portfolio optimization efforts. On the other hand, Super Micro Computer's shares fell by 8.3%, the steepest drop on both indices, following a late Friday announcement that Nasdaq would remove the AI server manufacturer from the index effective prior to the market open on December 23. Ford Motor's shares declined by 3.9%, prompted by Jefferies revising its rating from hold to underperform and adjusting the price target down to $9 from $12.
Ford's partnership with South Korean EV battery maker SK On secured up to a $9.63 billion loan from the US government for the establishment of three new battery production facilities. Gold prices dipped by 0.2%, settling at $2,670.20 per troy ounce, while silver increased by 0.1%, reaching $31.05 per ounce..