Nasdaq slips as Apple slips, with Fed rate cut on horizon

Stocks traded mixed on Monday, with tech names struggling ahead of a crucial week dominated by expectations for the Federal Reserve’s first interest rate cut in four years.

The Nasdaq Composite (^IXIC) fell about 0.7%. The Dow Jones Industrial Average (^DJI) rose 0.5%, while the S&P 500 (^GSPC) was little changed after strong weekly gains for the major stock indexes.

Techies are under pressure as Apple ( AAPL ) shares lose ground amid concerns over iPhone 16 sales. The megacap’s shares fell more than 3% after The Street reported that analysts’ findings that early demand for the recent smartphone updated is behind the 2023 level.

More broadly, stocks are diverging amid growing bets that the Fed will opt for a steeper cut of 50 basis points in its monetary policy decision on Wednesday at the end of its two-day meeting.

The central bank is almost universally expected to deliver the first US interest rate cut in four years – a significant policy shift and the official end of a years-long tightening campaign aimed at reducing inflation.

Read more: Fed forecasts for 2024: What experts say about the possibility of a rate cut

That belief has investors wondering how aggressively the Fed will cut rates, either by 0.5% or 0.25%. A half-point move would protect the labor market and reduce the risk of a recession, but it would also risk spooking investors, signaling a dire economic outlook.

As of Monday, traders are pricing in a 63% chance of a huge move, compared to 50% a day ago. The 25-basis-point discount rate is 37%, according to CME’s FedWatch tool.