Dollar

Wall Street Rallies Over 1% as Investors Seek Bargains Amid Rate Decision Uncertainty

Wall Street’s three major indexes surged over 1% on Monday as investors hunted for bargains following last week’s sell-off, while waiting for crucial inflation data and the Federal Reserve’s upcoming policy decision next week.

Last week’s market retreat, driven by weaker-than-expected August jobs data and soft manufacturing numbers, marked the Nasdaq Composite’s largest weekly loss since January 2022 and the S&P 500’s biggest weekly drop since March 2023.

Amid growing concerns about the health of the U.S. economy and uncertainty over the Fed’s upcoming rate decision on September 18, investors started the new week on a more optimistic note.

“Investors had the weekend to reflect. There was clearly an overreaction to last week’s economic data, which sparked exaggerated fears of a potential recession,” said Kristina Hooper, chief global market strategist at Invesco. “A pause allows for more rational thinking.”

The Dow Jones Industrial Average climbed 484.18 points, or 1.20%, to close at 40,829.59. The S&P 500 gained 62.63 points, or 1.16%, finishing at 5,471.05, while the Nasdaq Composite added 193.77 points, or 1.16%, to 16,884.60.

Key events this week include the Consumer Price Index (CPI) report on Wednesday, following Tuesday night’s first debate between U.S. presidential candidates Kamala Harris and Donald Trump.

Phil Blancato, chief market strategist at Osaic Wealth in New York, noted that investors are refocusing on “high-quality stocks that have become cheaper.” He pointed specifically to Nvidia, a major player in artificial intelligence chips, which saw its shares rise 3.5% on Monday after falling 15.3% the previous week.

However, Blancato expressed caution over the market’s rally before the CPI report, which is expected to shed light on whether the Fed will cut rates by 25 or 50 basis points.

“The market is banking on a soft inflation print and a Fed rate cut. But what happens if the data doesn’t meet those expectations?” Blancato warned, predicting potential volatility following the Fed’s decision. Some investors could be disappointed by a modest 25-basis-point cut, while a larger 50-basis-point cut could signal deeper concerns about the economy.

Wednesday’s CPI report is expected to show a year-on-year moderation in headline inflation to 2.6% for August, with the monthly figure remaining steady at 0.2%. Producer price data will follow on Thursday.

Apple had a subdued performance, rising just 0.04% on Monday despite unveiling its new AI-enhanced iPhone 16, which earlier caused its stock to dip nearly 2%. The launch came as Chinese competitor Huawei began accepting orders for its Mate XT tri-fold phone.

All 11 major S&P 500 sectors finished higher, with consumer discretionary leading the gains, up 1.63%, and industrials following at 1.56%. Communication services posted the smallest gain at 0.04%.

Boeing shares rose 3.4% after reaching a tentative agreement with its largest union, averting a potential strike by over 32,000 workers.

Palantir and Dell Technologies both saw significant gains, rising 14% and 3.8% respectively, after news broke that they would join the S&P 500 index on September 23. They will replace American Airlines Group, up 3.9%, and Etsy, which fell 1.6%.

On U.S. exchanges, 10.75 billion shares were traded, slightly higher than the 10.72 billion 20-day moving average. Advancing stocks outnumbered decliners on the NYSE by a 2.16-to-1 ratio, with 258 new highs and 111 new lows. On the Nasdaq, the ratio was 1.58-to-1 in favor of advancing stocks, with 2,548 stocks rising and 1,616 falling.

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