On Monday, the Nasdaq and the S&P 500 experienced fluctuations within a trading range as investors anticipated several significant events including Big Tech earnings, a Federal Reserve decision on interest rates, and crucial labor data. Major tech stocks like Nvidia, Apple, Alphabet, Amazon.com, Microsoft, and Meta Platforms saw modest gains of up to 1.2%, though they did not reach their daily peaks. Tesla led the megacap stocks with a 5% increase after Morgan Stanley named it a top pick in the U.S. autos sector. This, along with a 4% rise in McDonald's following a successful $5 meal promotion, boosted the S&P 500 Consumer Discretionary index by 0.9%, making it the leading sector.
By mid-session, the Dow Jones Industrial Average had slightly dipped, while the S&P 500 and the Nasdaq Composite showed modest gains. Investors are keenly watching earnings reports from Microsoft, Meta, Apple, and Amazon.com, starting Tuesday, to evaluate the potential for further growth in the AI-driven equity rally. Despite their dominance, tech giants are now seeing investors shift focus to mid and small-cap stocks, which could benefit from a low-interest-rate environment. However, the small-cap Russell 2000 index fell 0.8% after three weeks of gains.
Last Friday, all three major U.S. stock indexes surged over 1% due to optimistic inflation data suggesting an early easing of monetary policy, following recent signs of a softening job market. Despite this, the S&P 500 and the Nasdaq ended the week lower, influenced by a weak start to tech earnings that led to their sharpest one-day decline since 2022. Expectations are high for the Fed to signal a rate cut in September, with a 90% chance of a 25-basis-point reduction according to the CME's FedWatch tool. Any hawkish remarks could lead to renewed selling pressure in equities.
This week's employment reports, including the Non-farm Payrolls, will be closely examined for insights into the easing labor market. Cryptocurrency stocks like Coinbase Global, Riot Platforms, and Marathon Digital declined about 2% each after an initial surge due to a seven-week high in bitcoin prices. Abbott Laboratories faced a 1.3% drop after being ordered to pay $495 million in damages for a premature infant formula-related lawsuit. Onsemi saw a significant 13.3% increase following a slight beat in second-quarter results. Market dynamics showed more declining issues than advancers on both the NYSE and the Nasdaq, with the S&P 500 and the Nasdaq recording numerous new 52-week highs and lows.
