Market Analysis

Wall Street's three major indexes saw gains of over 1% on Monday, as investors sought buying opportunities following last week's sell-off and ahead of key inflation reports and the Federal Reserve's upcoming policy decision next week.

The previous week saw investors retreat from equities after weaker-than-expected August jobs data and disappointing manufacturing numbers earlier in the week, leading to the Nasdaq Composite's largest weekly drop since January 2022 and the S&P 500’s biggest weekly decline since March 2023.

Amid concerns about the health of the U.S. economy, investors have been grappling with uncertainty regarding the Fed's interest rate decision, scheduled for September 18. However, Monday brought a more optimistic tone to the market.

"Investors had the weekend to reflect. The reaction to last week's economic data was exaggerated, causing unnecessary fears of a recession," said Kristina Hooper, chief global market strategist at Invesco. "A pause allows for a more measured approach."

The Dow Jones Industrial Average gained 484.18 points, or 1.20%, to 40,829.59, the S&P 500 rose 62.63 points, or 1.16%, to 5,471.05, and the Nasdaq Composite climbed 193.77 points, or 1.16%, to 16,884.60.

This week’s highlights include the Consumer Price Index (CPI) report, set for release on Wednesday morning, following Tuesday night’s first debate between U.S. presidential candidates Kamala Harris and Donald Trump in the lead-up to the November 5 election.

Phil Blancato, chief market strategist at Osaic Wealth, noted that investors are reassessing “high-quality stocks that are now more attractively priced.” He pointed to Nvidia (NASDAQ), a leading AI chipmaker, which surged 3.5% on Monday after a 15.3% decline last week.

Blancato expressed some caution about the rally ahead of Wednesday's CPI report, which is expected to shape the Fed's decision on whether to cut rates by 25 or 50 basis points. "The market is betting on a soft inflation reading and a Fed rate cut, but what if that doesn’t materialize?" he said, warning of potential volatility after the Fed’s decision.

Some investors may feel let down if the Fed opts for only a 25-basis-point cut, while a larger cut could stoke fears that the Fed is more concerned about the economy than anticipated. "It’s a no-win scenario," Blancato added.

Wednesday's CPI report is forecast to show headline inflation easing to 2.6% year-over-year in August, with monthly inflation expected to remain steady at 0.2%. Producer price data will follow on Thursday.

Apple Inc. (NASDAQ) had a relatively flat day, closing up just 0.04% after earlier slipping nearly 2%, following the launch of its new AI-enhanced iPhone 16.

All 11 major S&P 500 sectors posted gains, led by consumer discretionary stocks, which rose 1.63%, followed by industrials, which added 1.56%. The smallest increase came from the communication services sector, which was up 0.04%.

Apple's iPhone launch occurred just hours after Chinese competitor Huawei began receiving orders for its Mate XT tri-fold phone.

Boeing (NYSE) shares gained 3.4% after the aerospace giant reached a tentative labor deal with its largest union, covering over 32,000 workers and averting a potential strike.

Palantir (NYSE) shares surged 14%, while Dell Technologies (NYSE) rose 3.8% after the news broke late Friday that both companies would be added to the S&P 500 index on September 23.

In the benchmark index, these stocks will replace American Airlines (NASDAQ), which rose 3.9%, as well as Etsy (NASDAQ), which dropped 1.6%, and Bio-Rad Laboratories (N), which fell 2%.

A total of 10.75 billion shares were traded on U.S. exchanges, slightly above the 10.72 billion average from the past 20 sessions.

Advancing issues outpaced decliners by a 2.16-to-1 ratio on the NYSE, with 258 stocks hitting new highs and 111 hitting new lows.

On the Nasdaq, 2,548 stocks gained while 1,616 declined, giving a 1.58-to-1 ratio of advancers to decliners. The S&P 500 recorded 27 new 52-week highs and 4 new lows, while the Nasdaq Composite saw 45 new highs and 177 new lows.

Paraphrasing text from "Reuters" all rights reserved by the original author.