The Nasdaq composite slipped 0.5 per cent as big technology stocks and other market superstars gave back a bit of their big gains from recent years. Apple fell after a soft assessment of pre-order sales of the new iPhone 16 series from Ming-Chi Kuo, an analyst at TF International Securities.
Most stocks rose on Wall Street, and Oracle’s gain of 5.1 per cent helped lead the market. The software company continued a strong run that began last week with a better-than-expected result.
Alcoa also jumped 6.1 per cent after saying it would sell its ownership stake in a Saudi Arabian joint venture to Saudi Arabian Mining Co. for $US950 million ($1.4 billion) in stock and $US150 million in cash. But drops for some influential Big Tech stocks kept indexes in check, including declines of 2.8 per cent for Apple and 1.9 per cent for Nvidia. They’re among the market’s most influential stocks because they’re among the largest by market value. Apple fell after a soft assessment of iPhone 16 pre-sales.
Stock indexes have been taking a jagged, scary ride toward their records. After worries about the US economy and other hiccups in global markets briefly sent the S&P 500 nearly 10 per cent below its all-time high last month, the S&P 500 is just one middling day away from its record on excitement about coming cuts to interest rates.
Treasury yields eased in the bond market ahead of what’s expected to be the week’s main event. On Wednesday, the widespread expectation is for the Federal Reserve to cut its main interest rate for the first time in more than four years to deliver some relief to the economy.
The only question is by how much relief for the economy the Fed will deliver. Traders are shifting more bets toward a larger-than-usual move of half a percentage point, according to data from CME Group. They’re anticipating a 63 per cent chance the Fed will go beyond the traditional cut of a quarter of a percentage point. That’s up from 50 per cent on Friday and just 30 per cent a week ago.
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The difference between a half-point cut and a quarter may sound academic, but it can have far-ranging effects. Lowering rates relieves pressure on the economy, but it can also give inflation more fuel.
The Federal Reserve has been keeping its main interest rate at a two-decade high in hopes of slowing the economy enough to stifle high inflation. With inflation having eased substantially from its peak two summers ago, the Fed has said it can turn more focus to bolstering the slowing job market and economy. Some critics say it may be moving too late, increasing the risk of a possible recession.
A Fed cut of half a percentage point would likely be the best case for the stock market in the very short term, according to Michael Wilson and other strategists at Morgan Stanley. But that’s only if the Fed can convince investors it’s not getting forced into a bigger-than-usual cut because of worries about a recession, among other factors.
The more important thing over the next three to six months will be how well the job market holds up, according to Wilson. If employment weakens, stocks could fall regardless of whether the Fed cuts by half or a quarter of a percentage point on Wednesday.
In the bond market, the yield on the 10-year Treasury fell to 3.62 per cent from 3.66 per cent late Friday. The two-year yield, which moves more closely with expectations for the Fed, eased to 3.56 per cent from 3.59 per cent.
In other international markets, indexes were mixed amid mostly modest movements across Europe and Asia. Hong Kong’s Hang Seng added 0.3 per cent after data released over the weekend showed China’s economy slowed further in August.
Markets in Japan, mainland China and South Korea were closed for holidays.
AP
Source Agencies
