The US stock market continued to fall with technology stocks leading the decline. The Nasdaq dropped over 200 points after Federal Reserve Chairman Jerome Powell's recent comments dampened hopes for further steep rate cuts. Investors are now closely watching September's non-farm payroll data for clues on future Fed rate decisions.
The Dow Jones Industrial Average fell 199.47 points (0.47%) to 42130.68 points, the Nasdaq dropped 205.91 points (1.13%) to 17983.26 points, and the S&P 500 index decreased by 41.45 points (0.72%) to 5721.03 points. Despite the decline, both the S&P 500 and Dow had reached all-time closing highs recently.
In his speech, Powell indicated that the Federal Reserve does not have a preset course for rate policies. If economic conditions meet expectations, two more rate cuts of 25 basis points each are anticipated this year. The Fed’s gradual approach to rate cuts reflects increasing confidence in economic growth and consumer spending.
Currently, traders estimate a 40% chance of a 50 basis point rate cut next month, down from 53% last week. Analysts project a total rate cut of 70 basis points this year. David Chao from Invesco noted that global risk assets may perform well by year-end due to resilient macroeconomic conditions and growth.
Historically, September is a poor-performing month for US stocks. However, this year all three major indices posted gains for the month: the Dow up 1.85%, the Nasdaq up 2.68%, and the S&P 500 up 2.02%. In the third quarter, the Dow rose 8.2%, the Nasdaq gained 2.6%, and the S&P 500 increased by 5.53%.
The Fed's rate cut of half a percentage point in September boosted the stock market’s performance. Market attention is also on the International Longshoremen's Association strike on the East and Gulf coasts, which could disrupt trade and economic activities significantly.
Economic indicators show that the US labor market remains tight. The Job Openings and Labor Turnover Survey (JOLTs) reported 8.04 million job openings in August, higher than the expected 7.655 million. Construction spending in August fell 0.1%, contrary to expectations of a 0.1% increase. The ISM Manufacturing PMI for September remained at 47.2, below the expected 47.5.
The upcoming September non-farm employment report will be a crucial indicator of the labor market’s health and will influence future Fed rate decisions. Market analysts, such as Dave Sekera from Morningstar, suggest that the Fed might consider larger rate cuts if employment data disappoints.
Overseas, Eurozone inflation data showed a decrease to 1.8% in September from 2.2% in August. European Central Bank President Christine Lagarde expressed confidence in achieving the 2% inflation target, hinting at potential rate cuts.
Among individual stocks, Nvidia and Microsoft are expected to continue leading the AI revolution. Tesla will unveil its Robotaxi on October 10, named “Cybercab.” Apple faces weak demand for the iPhone 16, according to Barclays, which maintained a "Underweight" rating with a target price of $186. Boeing is contemplating raising $10 billion through new stock issuance. The German Federal Cartel Office has classified Microsoft as significant for market competition, increasing regulatory scrutiny. Google is investing $2 billion in a new data center in Malaysia. Meta Platforms plans to expand AI investments in Vietnam. Additionally, Goldman Sachs has upgraded Ford's rating to "Buy," and Raymond James downgraded Disney's rating due to pressure on its theme park business.
