The Dow Jones Industrial Average dropped 0.77%, the Nasdaq fell 0.22%, and the S&P500 is down 0.43% as the final session results were released.
After the significant rise seen on Friday, “it is not surprising that the market gave back some of the gains today, with short-term investors realizing some profits,” commented Sam Stovall from CFRA.
Last week, some market participants expected the Federal Reserve (Fed) to take a more restrictive stance, but it turned out to be more accommodating.
Fed Chairman Jerome Powell stated on Friday that a “quick” labor market deterioration cannot be ruled out, which could “justify” a monetary policy easing, specifically a reduction in the reference interest rate.
The Fed’s next monetary policy meeting is scheduled for September 17, and it may lead to a 25-point reduction in that rate, according to the CME’s FedWatch analysis.
However, Stovall moderated expectations by saying “there is still a lot of economic data that can temper current investor enthusiasm,” starting with Thursday’s estimate on the U.S. economy’s growth in the second quarter.
Analysts expect better numbers than the first quarter, which “could be encouraging” by indicating “that the economy remains resilient and is not heading into a recession,” predicted Stovall.
But “this would also imply that the Fed does not need to be so aggressive in its rate reduction,” he added.
On Friday, the PCE index, which assesses price behavior from a personal consumption expenditures perspective for July, is due.
Until then, all eyes are on Nvidia, the world’s leading market capitalization, which will release its quarterly results on Wednesday after the stock market closes.
The semiconductor conglomerate “has fueled the stock market rise since the end of 2023, and investors are patiently awaiting the company’s outlook to evaluate how far the recovery can go,” noted Jose Torres from Interactive Brokers.
Estimates collected by FactSet point to a more than 50% increase in business volume in the second quarter.
