Tech stocks lead the recovery after Wall Street's worst week, with hopes pinned on a Fed rate cut
US stocks surged on Monday as investors took advantage of a dip after Wall Street’s worst week of the year, betting on an expected Federal Reserve rate cut to support the slowing economy.
According to CNBC, technology stocks that were hit hardest last week led the recovery.
The Dow Jones Industrial Average climbed 484.18 points, or 1.2 percent, to finish at 40,829.59. This recovery followed a loss of over 1,200 points from the previous week. The S&P 500 rose 1.16 percent to 5,471.05, breaking its four-day losing streak after its worst performance since March 2023.
Similarly, the Nasdaq Composite rose by 1.16 percent to close at 16,884.60. Nvidia, which dropped 14 percent last week, rebounded by 3.5 percent, helping the tech-heavy index recover.
In addition to tech, sectors like retail, banking, and industrials also bounced back, driven by investor optimism that a rate cut could boost consumer activity. JPMorgan Chase, Costco, Amazon, and Boeing all saw gains.
Sarat Sethi, managing partner at Douglas C. Lane & Associates, commented on the market’s rebound: “I do think you have a little short-term bounce here — we were a little bit oversold last week.”
“However, the markets are very focused on how the economy is going to be now, rather than what inflation is going to do and what the economy is going to do. When the uncertainty starts building … first thing you do is take some money off, especially since you’ve had such a good run this year.”
Investors now await two critical inflation reports, the consumer price index and the producer price index for August, set to release on Wednesday and Thursday.
These reports could provide further insights into the Federal Reserve’s rate decision on September 18. Traders widely expect at least a quarter-point rate cut.
The recovery on Monday came after substantial losses in the stock market, marking a challenging start to September, historically a tough month for equities. The declines were partially driven by the August jobs report, which stoked concerns about a weakening labour market.
According to the Stock Trader’s Almanac, the S&P 500 typically falls 0.7 percent in September, making it the worst-performing month for stocks.
Palantir and Dell Technologies also posted gains, with shares rising 14 percent and 3.8 percent, respectively, after news that both companies would join the S&P 500, as announced by S&P Dow Jones Indices on Friday.
