U.S. stocks ended lower on Monday, with the Dow Jones Industrial Average down 35.85 points (0.11%), the S&P 500 losing 25.44 points (0.62%), and the Nasdaq Composite dropping 119.51 points (1%). This decline was caused by investors anticipating that the Federal Reserve would take longer to reduce interest rates.
The FED’s stance on interest rates is a significant factor impacting the stock market, as higher rates can increase borrowing costs and slow down economic growth. Investors are keeping a close eye on Fed officials’ speeches this week, especially Chair Jerome Powell’s on Tuesday, for any changes in interest rates or monetary policy.
The U.S. Treasury Secretary, Janet Yellen, expressed optimism on Monday, stating that the country may avoid a recession as inflation decreases while the labor market stays robust. After a challenging year in 2022, U.S. equities have experienced a strong recovery in 2023, with growth stocks leading the charge and short-lived hopes for the FED to temper its rate hikes, which could ease pressure on equity valuations. According to the investors, the benchmark rate may peak at 5.1 percent by July, in line with previous expectations from policymakers.
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Some companies, such as Tyson Foods, experienced a drop in stock prices after missing revenue and profit estimates. At the same time, Newmont Corp saw a decline following its $16.9 billion offer for Australian company Newcrest Mining. Alternatively, Tesla saw a 2.5 percent increase after CEO Elon Musk was cleared of wrongdoing in a court case. Meme stocks like AMC Entertainment and Gamestop increased, with respective daily profits of 11.8 percent and 7.2 percent. Pinduoduo, a U.S.-listed Chinese stock, fell 1.9 percent due to geopolitical concerns.
Opinions among experts and analysts vary on the potential outcome of the FED’s next steps. Senior financial strategist Brian Jacobsen from Allspring Global Investments stated, “We got that blowout jobs report, and people have had to reassess what the outlook for the FED and the economy is. Tomorrow it will be interesting to see if Powell continues his transformation from hawk to dove. ” However, according to Refinitiv, experts predict that S&P 500 companies’ quarterly earnings would fall 2.8% in the fourth quarter.
Over the years, the decisions taken by various Federal Reserve Presidents have had different outcomes on the stock market and the economy. However, the most recent FED Chair, Jerome Powell, is seen as having transformed from a hawk to a dove, and his rhetoric will be closely watched this week. The different opinions and views of experts and analysts on the potential outcome of the FED’s next steps highlight the uncertainty surrounding the stock market. Nevertheless, the S&P 500 has posted five new 52-week highs, and the Nasdaq Composite recorded 79 new highs, indicating a certain level of optimism among investors.
