On Monday, U.S. equity markets exhibited a mixed performance, primarily as sectors like consumer discretionary and technology faced declines. Traders are increasingly pricing in a higher likelihood of a significant interest rate cut of 50 basis points ahead of the Federal Reserve's final policy announcement preceding the upcoming U.S.
presidential elections. The S&P 500 index edged up by less than 0.1%, reaching 5,628.5, while the Nasdaq Composite experienced a decline of 0.7%, settling at 17,551.4 by midday. Conversely, the Dow Jones Industrial Average saw a rise of 0.3%, reaching 41,524.6. Excluding consumer discretionary and technology, all other sectors reported gains during intraday trading.
Notably, semiconductor stocks suffered, with major players like Arm Holdings ($ARM), Micron Technology (MU), and Broadcom ($AVGO) taking a significant hit, marking some of the steepest declines on the charts. Meanwhile, Treasury yields experienced a downturn, with the 10-year yield decreasing by 2.4 basis points to 3.63%.
Additionally, the two-year rate decreased by 2.3 basis points, resting at 3.55%. As of Monday afternoon, the possibility of a 50 basis point cut set for September 18 stood at 59%, a marked increase from 30% one week prior, according to the FedWatch Tool. The remaining probability of 41% indicates a preference for a 25 basis point reduction, down from 70% previously. The forthcoming Federal Open Market Committee's policy announcement is particularly significant, being the last before the important presidential elections scheduled for November 5.
Market analysts are observing that any significant reduction in rates could signal underlying concerns about the stability of the U.S. economy. Derek Holt, the head of capital markets economics at Scotiabank, commented that while the jobs data has shown some softness, core inflation remains ambiguous yet is trending towards easing.
He noted that the gross domestic product recorded growth of 3% in the second quarter. Current estimates, referred to as 'nowcasts' from the Atlanta Federal Reserve and the New York Federal Reserve, suggest growth approximating 2.5% for the third quarter. Holt affirmed, 'The soft landing we've always expected continues to unfold,' while Scotiabank's perspective leans towards a more conservative 25 basis-point rate reduction as there is insufficient reason to expedite such measures. In economic developments, the Empire State manufacturing index as reported by the New York Federal Reserve saw a significant spike to 11.5 in September, increasing from a previous reading of -4.7 in August.
This figure outperformed expectations, which had projected a modest improvement to -4. The positive reading represents the first sign of expansion since November 2023, indicating an encouraging return to growth in the manufacturing sector. In the realm of company news, Intel ($INTC) has officially secured qualification for as much as $3.5 billion in funding from the U.S.
government designated for the manufacture of semiconductors tailored for a confidential military program, as reported by Bloomberg News. This announcement catalyzed shares of the chipmaker to surge nearly 3% intraday, positioning them among the top gainers on major indices including the S&P 500, Nasdaq, and Dow. Additionally, Melius Research has upgraded Oracle ($ORCL) from a hold rating to a buy, significantly increasing its price target from $155 to $210.
Oracle's stock responded positively, trading over 5% higher intraday, establishing it as a standout performer on the S&P 500. In commodities, West Texas Intermediate crude oil futures witnessed an increase of 2%, climbing to $70.05 per barrel. In precious metals, gold saw a slight decrease of 0.1%, resting at $2,608 per ounce, while silver experienced a marginal rise of less than 0.1% to $31.12..