The U.S. stock market opened lower with the Dow Jones Industrial Average dropping 80.20 points to 42,249.95, the Nasdaq falling 31.81 points to 18,157.36, and the S&P 500 decreasing by 7.30 points to 5,755.18. Federal Reserve Chair Jerome Powell's recent comments have led the market to scale back expectations for another significant interest rate cut.
Powell indicated that there is no predetermined path for the Fed’s rate policy, and he expects two more rate cuts this year, each by 25 basis points, provided the economy performs as anticipated. Following a significant 50-basis point cut last month, the Fed is likely to stick to gradual 25-basis point reductions given the renewed confidence in economic growth and consumer spending.
Currently, traders estimate a 40% probability for a 50-basis point cut next month, down from 53% last week, and predict a total reduction of 70 basis points for the year.
Despite historically poor performance in September, this year broke the trend with the Dow up 1.85%, Nasdaq up 2.68%, and the S&P 500 up 2.02%. In the third quarter, the Dow surged 8.2%, the Nasdaq 2.6%, and the S&P 500 5.53%, thanks in part to the Fed’s rate cut in September.
The focus is now on the upcoming September non-farm payroll report, expected to be a key catalyst for market movements. Concerns are also growing over strikes by the International Longshoremen's Association on the East Coast and Gulf Coast, potentially causing daily economic losses of $3.8 billion to $4.5 billion.
Analysts warn that the strike could disrupt container and automobile shipments, affecting half of U.S. trade volume, though bulk goods and military cargo will remain unaffected. JPMorgan estimates significant daily economic losses due to the strike.
Upcoming economic data include the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTs) and manufacturing reports from S&P Global and ISM. The Eurozone inflation data showed a decline to 1.8%, leading to increased bets on rate cuts by the European Central Bank.
Key stocks to watch include Nvidia (NVDA, Financial) and Microsoft (MSFT), both leading the AI revolution with projections of the AI infrastructure market growing tenfold by 2027. Tesla's (TSLA) upcoming Robotaxi unveiling could revolutionize autonomous driving. However, Barclays has downgraded Apple (AAPL) due to weak iPhone 16 demand, and Boeing (BA) may issue new stock to raise $10 billion amid cash flow concerns.
In other corporate news, Google (GOOGL) has initiated the construction of a $2 billion data center in Malaysia. Meta Platforms (META) is expanding AI investments in Vietnam, and Goldman Sachs has upgraded Ford (F) to a "buy" rating. Disney (DIS) faces pressure on its theme park business, while CVS Health (CVS) may consider a company split.
