On Monday, US stock markets experienced a lift as investors turned their focus to the upcoming Federal Reserve policy meeting, amidst mixed economic data. This follows a period of volatility including the S&P 500 entering correction territory last week.
The S&P 500, a benchmark for US equities, registered a gain of 0.6%, marking a rebound for the second consecutive day. The Dow Jones Industrial Average saw an even more significant rise, climbing over 350 points, equivalent to more than 0.8%. Meanwhile, the Nasdaq Composite, heavily weighted with technology stocks, inched up by 0.3%, despite some tech giants like Nvidia and Tesla faltering during the session.
This rally comes on the heels of a downturn that had previously sent the S&P 500 into correction territory and the Dow into its worst week since March 2023. Investors have been navigating concerns about an economic slowdown and the impact of unpredictable tariff policies under the Trump administration. Treasury Secretary Scott Bessent, in a recent statement, sought to ease tensions by describing corrections as ‘healthy,’ yet he also cautioned that a recession remains a possibility.
Fresh data showed retail sales rose by just 0.2% in February, below the expected 0.6%, and January’s figures were revised down to a 1.2% decrease. Amid these figures, expectations of a rate cut by the Federal Reserve gained traction among investors, especially as manufacturing activity in New York showed a marked decline, with the business conditions index dropping sharply. This has set the stage for the Federal Reserve’s two-day meeting starting Tuesday, where policymakers are anticipated to hold rates steady, despite rising speculation for potential rate cuts later this year.
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Market observers noted gains across all 11 sectors of the S&P 500, with Energy and Real Estate stocks leading the charge. The ‘Magnificent Seven’ of the technology sector, including Nvidia and Tesla, struggled but managed to climb off session lows. However, some investors remain cautious, as seen by downgrades in year-end targets for the S&P 500 by firms like RBC Capital Markets, which cited economic growth concerns.
Tesla faced additional pressures as its stock tumbled over 5% following news of a free trial offer for its self-driving software in China, a critical market for the EV maker. Meanwhile, Robinhood announced new prediction markets, signaling a potential shift in its business model, and Intel’s stock surged upon reports of significant strategic changes planned by its new CEO.
As markets await the Federal Reserve’s decisions, underlying economic data continues to influence investor sentiment. Despite the recent rally, the ongoing economic challenges and policy uncertainties suggest that volatility may persist. Observers will closely watch the Fed’s actions and statements this week for further guidance on the economic outlook.
