Traders work on the morning trading floor of the New York Stock Exchange on August 23, 2024.
Angela Weiss | AFP | Getty Images
The Dow Jones Industrial Average rose to a record high on Monday, reversing selling pressure from early August as traders waited for the Federal Reserve to cut interest rates.
The 30-stock index was last up 112 points, or 0.3%, after rising more than 200 points, or 0.6%, at one point. The S&P 500 was down 0.2%, and the Nasdaq Composite was down 0.7%.
Traders appear to be shifting money out of tech stocks and into other areas. Energy stocks in the S&P 500 rose more than 1%, while tech stocks fell 1.5%.
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DJIA 1 month chart
The market started August under pressure as stock prices fell from record highs on concerns about a possible recession and the unwinding of a popular hedge fund trade pegged to the Japanese yen. The S&P 500 fell 3% on August 5, its biggest one-day drop since 2022. The Dow Jones Industrial Average also suffered its biggest sell-off in nearly two years that day, plummeting by more than 1,000 points.
But stocks have since surged on hopes of the Federal Reserve cutting interest rates and improving U.S. economic data. The S&P 500 has risen 8% since Aug. 5, less than 1% from its all-time high hit in mid-July, while the Dow has surged about 7%. The rebound was widespread across the market, with the Russell 2000 index of small-cap stocks up 3% after Powell’s comments.
Stocks ended the week on a strong note after comments from Federal Reserve Chairman Jerome Powell made the case for a rate cut, something Wall Street had been eagerly awaiting, especially after some worrying economic data sparked a selloff in early August and investors worried that rising borrowing costs would hurt the U.S. economy.
Indeed, Powell did not say when or how much interest rates might be cut, but traders are unanimous in expecting a rate cut at the Fed’s September policy meeting, according to CME Group’s FedWatch tool.
“We believe the Fed will cut rates by 25 basis points in September, November and December because they want to signal to the market that they’re not behind the times, but at the same time they want to make sure they don’t jump too quickly into rate-cutting mode,” said Sam Stovall, chief investment strategist at CFRA Research. “Right now Wall Street is still breathing a sigh of relief that the Fed will cut rates and will also be anxiously awaiting Nvidia’s earnings release on Wednesday and PCE data this week.”
