Wall Street Indexes Rebound as Investors Anticipate Inflation Data and Fed Rate Cuts, Reports Reuters

By Sinéad Carew and Shubham Batra

Wall Street’s three major indexes saw gains of over 1% on Monday as investors sought bargains following last week’s sell-off. They also prepared for upcoming inflation reports and the Federal Reserve’s policy decision scheduled for next week.

Investor sentiment took a hit last week, driven by disappointing August jobs data on Friday, which came after weak manufacturing figures on Tuesday. This sequence led to the largest weekly decline for the Dow since January 2022 and the biggest drop for the S&P 500 since March 2023.

Amid concerns about the health of the U.S. economy, investors were faced with uncertainty surrounding the Fed’s interest rate decision due on September 18. However, a more optimistic mood appeared as markets opened on Monday.

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

The Dow jumped 484.18 points, or 1.20%, to close at 40,829.59. The S&P 500 rose by 62.63 points, or 1.16%, finishing at 5,471.05, while the Nasdaq Composite gained 193.77 points, or 1.16%, ending at 16,884.60.

This week features important events, including the consumer price index (CPI) report, set for Wednesday morning, following the first debate between U.S. presidential candidates Kamala Harris and Donald Trump on Tuesday night leading up to the November 5 election.

In the meantime, Phil Blancato, chief market strategist at Osaic Wealth in New York, noted that investors are reassessing “high-quality stocks that are now more affordable.” He specifically highlighted Nvidia, a prominent player in the artificial intelligence chip market, which saw its shares increase by 3.5% on Monday after a significant drop of 15.3% the previous week.

Despite this rally, Blancato expressed concerns about a muted trading atmosphere before major economic announcements, particularly the CPI report, which could influence whether the Fed opts for a 25 or 50 basis point rate cut.

“The market seems to be anticipating a very soft inflation reading, solidifying expectations for a Fed rate cut. What if this expectation isn’t met?” Blancato asked, anticipating volatility after the Fed’s decision.

Some investors may feel let down if the Fed opts for only a 25 basis point cut; conversely, a larger cut might signal serious economic concerns from the Fed.

“Ultimately, it’s a lose-lose scenario,” the strategist concluded.

The CPI report is expected to indicate a moderation in headline inflation to 2.6% year-over-year in August, with a monthly reading holding steady at 0.2%. Following the CPI report, producer price data will be released on Thursday.

On Monday, shares of Apple Inc had a modest day, gaining just 0.04% after initially dropping nearly 2% during the unveiling of its AI-enhanced iPhone 16.

All eleven major S&P 500 sectors closed higher, with consumer discretionary stocks leading with a 1.63% increase, closely followed by industrials, which added 1.56%. The least performing sector was communications services, which saw a gain of just 0.04%.

Apple’s highly anticipated phone launch coincided with rival Huawei starting to secure orders for its tri-fold Mate XT smartphone.

Boeing’s shares rose by 3.4% after the company reached a tentative agreement with its largest union, which represents over 32,000 workers, thus avoiding a potential strike.

Shares of Palantir surged 14%, while Dell Technologies saw a 3.8% increase following late Friday announcements about their inclusion in the S&P index on September 23.

These stocks will replace American Airlines, which gained 3.9%, and Etsy and Bio-Rad Laboratories, which saw respective losses of 1.6% and 2%.

On U.S. exchanges, 10.75 billion shares were traded, slightly above the 20-session average of 10.72 billion.

Advancing stocks outnumbered decliners by a 2.16-to-1 ratio on the NYSE, with 258 new highs and 111 new lows. Similarly, on the Nasdaq, 2,548 stocks advanced compared to 1,616 that declined, yielding a 1.58-to-1 ratio in favor of advancing issues. The S&P 500 recorded 27 new 52-week highs and 4 new lows, while the Nasdaq Composite noted 45 new highs and 177 new lows.