U.S. stocks closed modestly higher on Monday as investors assessed whether a trend will develop in the week following the Federal Reserve’s rate cut.
The gains came amid comments from Fed policymakers and steady factory activity data, building on last week’s sharp market rally after the central bank’s decision to lower interest rates.
The Fed’s pivotal move last week pushed major indexes to monthly gains, defying the historical trend of September as a weak month for equities.
Comments on Monday from three reserve bank presidents were the main focus as investors searched for clues on why the central bank kicked off its easing cycle with an outsized 50 basis-point cut.
Fed officials including Raphael Bostic, Neel Kashkari and Austan Goolsbee supported the central bank’s last rate cut and voiced support for more cuts in the rest of the year.
Trader bets, as per the CME Group’s FedWatch tool, initially favored a larger Fed move at its upcoming November meeting, after Governor Christopher Waller on Friday flagged that upcoming inflation data could undershoot the Fed’s 2% target.
However, the bets have swayed since then and now appear to be a coin-toss, with markets expecting a total reduction of 74 basis points by year-end, according to LSEG data.
On the data front, U.S. business activity remained steady in September, while average prices for goods and services increased at the fastest pace in six months, potentially signalling a rise in inflation in the months ahead.
“I think investors are still just sort of taking a wait-and-see attitude, if indeed a soft landing is the most likely outcome.” said Sam Stovall, chief investment strategist of CFRA Research in New York.
The Dow Jones Industrial Average (.DJI), opens new tab rose 61.29 points, or 0.15%, to 42,124.65, the S&P 500 (.SPX), opens new tab gained 16.02 points, or 0.28%, to 5,718.57 and the Nasdaq Composite (.IXIC), opens new tab gained 25.95 points, or 0.14%, to 17,974.27.
Eight of the 11 S&P 500 sectors were higher. Energy stocks (.SPLRCD), opens new tab led gains with a 1.31% rise, while healthcare stocks (.SPXHC), opens new tab declined 0.25%.
Among rate-sensitive growth stocks, Tesla (TSLA.O), opens new tab jumped 4.65%, while Meta Platforms (META.O), opens new tab rose 0.6% after Citigroup lifted its price target on the stock.
The Russell 2000 index (.RUT), opens new tab, tracking small caps, was off 0.25%.
All eyes are on Friday’s personal consumption expenditures figure for August – the Fed’s preferred inflation gauge. Analysts say this release will be the week’s most significant catalyst.
Among top movers, Intel (INTC.O), opens new tab rose 3.05% after a media report said Apollo (APO.N), opens new tab offered to make an investment of as much as $5 billion in the chipmaker.
General Motors (GM.N), opens new tab slipped 1.72% after Bernstein downgraded the carmaker’s stock to “market perform” from “outperform.”
Advancing issues outnumbered decliners by a 1.48-to-1 ratio on the NYSE. There were 505 new highs and 36 new lows on the NYSE.
The S&P 500 posted 62 new 52-week highs and one new low while the Nasdaq Composite recorded 80 new highs and 123 new lows.
