Tech stocks drag on S&P 500, Nasdaq as Fed meet nears
Technology stocks weighed on the S&P 500 and the Nasdaq as caution set in ahead of the Federal Reserve’s pivotal monetary policy decision, due later in the week, with a majority of traders pricing in a steep reduction in borrowing costs.
Rate-sensitive chip stocks fell as the markets opened on Monday, with Nvidia, which led much of this year’s rally, down two per cent, Broadcom dropping 2.2 per cent and Qualcomm losing 1.5 per cent, sending the Philadelphia SE Semiconductor index lower by 1.7 per cent.
Other growth stocks also took a hit. Amazon.com lost 0.70 per cent and Tesla fell 1.7 per cent. Apple slid 3.2 per cent after an analyst at TF International Securities said demand for its latest iPhone 16 models was lower than expected.
Markets have been in a bull run since the start of this year on expectations the world’s most influential central bank would kick off its monetary policy easing cycle soon.
The Dow hit an intraday record high and the S&P 500 is just shy of its own milestone.
The benchmark index and the tech-heavy Nasdaq notched their biggest weekly jumps in about 11 months on Friday, although analysts attributed the optimism to signs of a robust economy rather than rate-cut expectations.
Following a diverse batch of economic reports and comments from a former policymaker in the last few weeks, traders swayed in their bets on what decision the central bank would arrive at during its September 17 to 18 meeting.
Odds for a 50-basis-point cut are at 61 per cent from 30 per cent a week ago, according to the CME FedWatch Tool, which showed a 39 per cent probability of a 25-basis-point reduction. There is concern that an outsized move could mean the Fed sees the economy cooling at a faster-than-anticipated pace.
“Influential investors have been talking about the need for a 50-basis-point cut and we’re seeing increased talk of recession risks. As a result, there’s betting that we will get something other than the 25-bps cut,” said Sam Stovall, chief investment strategist at CFRA Research.
“It would be a good thing for the Fed to imply that they are ahead of the curve.”
In early trading on Monday, the Dow Jones Industrial Average rose 260.54 points, or 0.63 per cent, to 41,654.32, the S&P 500 lost 1.70 points, or 0.02 per cent, to 5,625.06 and the Nasdaq Composite lost 123.01 points, or 0.68 per cent, to 17,564.41.
Seven of the 11 S&P 500 sectors gained, although rate-sensitive tech stocks declined 1.2 per cent, while banks rose 0.70 per cent.
Among other movers, Intel Corp climbed 2.7 per cent after a report showed the chipmaker has officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the US Department of Defense.
In economic data, reports on retail sales, weekly jobless claims, housing starts and industrial production are due through the week.
Advancing issues outnumbered decliners by a 2.03-to-1 ratio on the NYSE, and by a 1.16-to-1 ratio on the Nasdaq.
The S&P 500 posted 75 new 52-week highs and one new low, while the Nasdaq Composite recorded 84 new highs and 24 new lows.
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