The tech-heavy Nasdaq led the charge on Monday, outpacing its counterparts on Wall Street.
This surge was fueled by optimism surrounding megacap growth stocks, buoyed by speculation of an imminent rate cut by the U.S. Federal Reserve following the release of data indicating a softening in inflation trends.
According to economists surveyed by Reuters, the Commerce Department’s recent report revealed that the personal consumption expenditures (PCE) price index, the Fed’s preferred metric for inflation, rose by 0.3% in February, falling short of the anticipated 0.4% increase.
These findings intensified expectations of a rate cut, with the CME Group’s FedWatch tool indicating a 66% probability of at least a 25 basis point reduction in June, up from 55% before the data release.
Federal Reserve Chair Jerome Powell’s remarks on Friday seemed to reinforce the possibility of rate cuts, as he described the latest inflation figures as “along the lines of what we would like to see.”
Despite the conventional wisdom that higher interest rates could dampen the appeal of megacap growth stocks, many such stocks, including Microsoft, Nvidia, Alphabet, and Amazon.com, saw gains ranging from 0.8% to 2.6%.
Market sentiment, however, suggests that the Federal Reserve is likely to maintain its current interest rate stance at the upcoming May policy meeting.
Thomas Martin, senior portfolio manager at GLOBALT Investments, noted, “We’re in the camp that they won’t (cut) in June, but that they will probably do three (cuts) this year.”
The recent uptick in Wall Street’s performance has been attributed to optimism surrounding artificial intelligence, robust corporate earnings, and the hope for a soft economic landing, where inflation moderates without triggering an economic slowdown.
The S&P 500 recorded a significant gain of over 10% in the first quarter of the year, marking its largest increase since 2019. Meanwhile, the Dow Jones Industrial Average is on the cusp of breaching the 40,000 level for the first time.
However, the yield on the 10-year benchmark U.S. Treasury note rose to 4.3032%, its highest level in a week, which somewhat tempered widespread gains.
In economic data releases, S&P Global’s final manufacturing PMI report for March came in at 51.9, while the ISM manufacturing March PMI surpassed expectations at 50.3, against a forecast of 48.5.
As of 10:02 a.m. ET, the Dow Jones Industrial Average was down 152.37 points, the S&P 500 was up 5.74 points, and the Nasdaq Composite was up 94.21 points.
Among the major S&P 500 sectors, utilities led losses, down 1.0%, while communication services surged by 1.4%. The Philadelphia Semiconductor Index gained 2.4%, driven by notable increases in shares of Micron Technology and Marvell Technology.
AT&T shares fell by 1.7% after the company announced an investigation into a data leak potentially affecting nearly 73 million current and former accounts.
Declining issues outnumbered advancers on both the NYSE and Nasdaq exchanges. The S&P index recorded 25 new 52-week highs and one new low, while the Nasdaq marked 62 new highs and 21 new lows.
