The Dow Jones Industrial Average (^DJI) reached a record close on Monday, marking a milestone for investors as they grappled with the impending interest rate cuts and prepared for a significant week dominated by Nvidia’s (NVDA) earnings report. The Dow Jones Industrial Average rose more than 0.1% to close at a new high of 41,240.52, while the S&P 500 (^GSPC) slipped 0.3% and the Nasdaq Composite (^IXIC) sank roughly 0.8%.
Technology stocks lagged during the session, with shares of AI chip giant Nvidia falling 2%, along with semiconductor peer Broadcom (AVGO) and EV maker Tesla (TSLA). Despite this, stocks were coming off weekly gains after Federal Reserve Chair Jerome Powell indicated that the Fed is prepared to lower rates in September. The major indexes all gained more than 1% last week, reflecting the positive sentiment in the market.
Investors quickly adjusted their expectations and began pricing in rate cuts totaling 1% by the end of 2024. With only three Fed meetings left in the year and the August jobs report still pending, Wall Street is speculating on the likelihood of a 0.5% cut and when it might occur.
The focus now shifts to Nvidia’s earnings report, which is expected to be a significant event of the week. The results of this report will likely determine the market’s mood and could impact the AI trade, which has been a major driver of stock gains. If Nvidia’s results fail to meet expectations, it could test the market’s rebound from August lows.
Additionally, investors are awaiting updates on Fed policymakers‘ preferred inflation gauge, the PCE index print, and a reading on second-quarter GDP. These economic indicators will play a crucial role in shaping rate-path calculations and market sentiment moving forward.
Meanwhile, oil prices surged around 3% due to reports of production shutdowns in Libya and escalating tensions in the Middle East. Global benchmark Brent crude futures settled at $81.43 a barrel, while US benchmark WTI crude futures closed at $77.42 a barrel.
In conclusion, the record close of the Dow Jones Industrial Average, coupled with the anticipation of interest rate cuts and Nvidia’s earnings report, has set the stage for a dynamic and eventful week in the financial markets. Investors will be closely monitoring these developments to gauge the market’s direction and potential opportunities for growth.