On Monday, the Dow Jones Industrial Average marked a spectacular achievement by closing at its all-time high, reaching a notable figure of 41,622.1. This surge generates significant anticipation as traders brace themselves for the Federal Reserve's forthcoming monetary policy decision, which is due later in the week.
The positive momentum propelled the Dow, increasing by 0.6%, while the S&P 500 also saw a modest rise of 0.1%, settling at 5,633.1. In contrast, the Nasdaq Composite experienced a decline of 0.5%, closing at 17,592.1. Financials and energy sectors showed remarkable gains, showcasing the robust performance underlying these areas of the market.
However, technology and consumer discretionary sectors faced challenges, with both closing lower amid fluctuating investor sentiment. As the Federal Open Market Committee gears up for its upcoming two-day meeting, which is set to kick off on Tuesday, all eyes will be on the decision regarding the benchmark lending rate anticipated for Wednesday.
Current projections indicate a 63% probability that the FOMC will implement a 50 basis point cut in interest rates, while the remaining odds lean slightly towards a 25 basis point reduction, as analyzed by the CME FedWatch tool. Several esteemed analysts, including those from Goldman Sachs, Oxford Economics, and Oppenheimer Asset Management, predict that policymakers are likely to lean towards a more moderate quarter-percentage-point rate cut.
'The state of the economy is stable enough to avoid a larger reduction that could potentially signal to businesses, consumers, and the market that there are underlying economic challenges,' elaborated an Oppenheimer representative in a Monday client note. Oxford Economics echoed this sentiment, indicating, 'Given the downside risks present in the labor market, we anticipate the Fed adopting a dovish stance and suggesting that this may merely mark the onset of an easing cycle.' On the bonds front, the yield on the US 10-year treasury note edged down by three basis points, now standing at 3.62%, while the two-year rate saw a decline of 1.7 basis points, closing at 3.56%.
In a noteworthy economic update, the New York Fed reported that manufacturing activity in New York has experienced growth for the first time since November, driven by significant increases in both orders and shipments this month. Meanwhile, West Texas Intermediate crude oil prices surged by 2.7% to reach $70.47 per barrel.
This price increase correlates with the ongoing challenges of considerable crude oil and natural gas production in the Gulf of Mexico remaining offline following the impacts of Hurricane Francine, as assessed by D.A. Davidson in a Monday client memo. In company-specific developments, shares of Intel ($INTC) surged upwards by 6.4%, emerging as the top performer across all three benchmark indexes.
This spike followed the announcement that the chipmaker had secured US government funding of up to $3 billion to bolster its Secure Enclave program, which plays a critical role in securing the domestic supply chain for advanced chips necessary for defense and national security systems. Conversely, Apple ($AAPL) shares faced a decline of 2.8%, making it the steepest decliner within the Dow and one of the poorest performers on the Nasdaq.
Reports suggested that demand for the recently unveiled iPhone 16 has not met market expectations, prompting caution among investors. Micron Technology ($MU) also encountered difficulties, being one of the significant decliners on both the S&P 500 and the Nasdaq, down by 4.4%. This followed Morgan Stanley's adjustment of its price target on the stock from $140 to $100 while retaining its equal weight rating.
In the commodities market, gold and silver prices remained relatively stable, with gold priced at $2,609.80 per troy ounce and silver at $31.09 per ounce. Investors will remain vigilant as these market dynamics unfold, particularly with the upcoming Fed meeting that could potentially reshape investor outlooks moving forward..