On Monday, both the S&P 500 and the Nasdaq Composite achieved remarkable milestones, reaching new record highs. The market rally was largely fueled by a robust performance from the technology sector, setting the stage for significant events later in the week, including the Federal Reserve’s interest rate decision and the release of crucial inflation data.
By 4:00 PM ET (8:00 PM GMT), the S&P 500 surged by 0.3% to reach an all-time high of 5,362.70, signaling investor optimism. Similarly, the Nasdaq Composite saw a 0.4% gain, reflecting the strength of tech stocks in driving market sentiment. Even the Dow Jones Industrial Average recorded modest gains, rising by 69 points or 0.2%.
However, amidst the broader market upswing, Apple (NASDAQ:AAPL) experienced a slight setback, with its stock dipping nearly 2% following the unveiling of its latest venture, Apple Intelligence, at the company’s annual developer conference. Despite the potential of this new AI platform to revolutionize user experience and enhance personalization, some investors appeared cautious, leading to a temporary decline in Apple’s share price.
Conversely, Nvidia (NASDAQ:NVDA) ended the day on a positive note, while Advanced Micro Devices Inc (NASDAQ:AMD) faced challenges, declining by over 4% after Morgan Stanley downgraded the chipmaker due to concerns about its valuation.
The focal point of investor attention remains the impending Federal Reserve meeting scheduled for Wednesday. Expectations are high that the central bank will maintain interest rates at their current levels. However, market participants are eagerly awaiting insights into the Fed’s future monetary policy trajectory, particularly regarding potential rate cuts for the remainder of 2024. Initial projections suggest a reduction from the three rate cuts forecasted in March to just two 25-basis point cuts.
Citi economists have adjusted their forecast, now expecting the Fed to initiate rate cuts in September, a shift prompted by the release of stronger-than-expected May jobs data. They maintain that while current economic indicators signal robustness, underlying factors such as slowing hiring demand may compel the Fed to implement a series of rate cuts in the coming months to support sustained economic growth.
Additionally, Wednesday will witness the release of the consumer price index (CPI) inflation data, anticipated to confirm persistent inflationary pressures above the central bank’s target range. With inflation data being a pivotal factor influencing the Fed’s policy decisions, market anticipation is heightened ahead of Fed Chair Jerome Powell’s post-meeting press conference.
Elsewhere, the financial sector encountered challenges, notably Huntington Bancshares Incorporated (NASDAQ:HBAN), which faced a decline of over 6% after revising its net interest income guidance for the year downwards. Conversely, Southwest Airlines (NYSE:LUV) witnessed a remarkable surge of over 7% following reports of activist investor Elliott Investment Management’s substantial stake in the company and its plans for strategic changes.
As investors brace for these pivotal events, the market may experience heightened volatility, emphasizing the importance of diligence and prudent risk management strategies for navigating the evolving market landscape.