Dow, S&P 500, Nasdaq slide as investors rethink rate cut bets

VaselineOctober 7, 2024

0 3 minutes read

U.S. stocks fell on Monday as investors revised their views on interest rate cuts after a jobs report blew up ahead of a week of key inflation data and the start of the earnings season.

The Dow Jones Industrial Average (^DJI) fell 0.3% after hitting a fresh record as stocks rallied to close the week. The S&P 500 (^GSPC) fell about 0.2%, while the Nasdaq Composite (^IXIC) led losses with a 0.4% decline.

Hopes for an excessive rate cut by the Federal Reserve faded after a better-than-expected jobs report in September dispelled concerns about cracks in the labor market. The benchmark 10-year Treasury yield (^TNX) hit 4% for the first time since August amid doubts about the Fed’s next move.

Read more: What Fed rate cuts mean for bank accounts, CDs, loans and credit cards

Traders abandoned last week’s bets on a 0.50% rate cut in November and now see an 88% chance of a 0.25% move, according to the CME FedWatch tool. Those expectations could hurt stocks, which have risen to record highs amid confidence that deep interest rate cuts and an economic “soft landing” are on the table.

October’s consumer inflation report is now awaited, which is expected to provide fresh insight into whether the Fed is making progress in reducing already cooling price pressures to its 2% target.

The start of third-quarter earnings is in focus as Goldman Sachs ( GS ) raised its target for the S&P 500, saying it expects higher margin growth for corporate companies. After Thursday’s Pepsi ( PEP ) results, the season begins in earnest on Friday with reports from big banks JPMorgan ( JPM ), Wells Fargo ( WFC ), and BlackRock ( BLK ).

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Monday, October 7, 2024 at 16:24 GMT+2

‘Mag 7’ Stocks Shuffle as Nvidia Rises 1%, Amazon Falls 2%

Nvidia ( NVDA ) and Amazon ( AMZN ), two of the “Magnificent Seven” stocks, were moving in opposite directions on Monday.

The Nvidia chip rose more than 1 percent to trade above $126 a share.

E-commerce and cloud giant Amazon fell more than 2 percent after Wells Fargo downgraded the stock to Equal-weight from Overweight on expectations that advertising revenue will moderate.

Cloud drive “The power of AWS alone is not enough,” wrote Wells Fargo analyst Ken Gawrelski.

Shares of Nvidia rose more than 1%
Monday, October 7, 2024 at 15:30 GMT+2

Stocks open lower as 10-year Treasury yield tops 4%

The major averages opened lower on Monday as the 10-year Treasury yield (^TNX) climbed back above 4%.

The Dow Jones Industrial Average (^DJI) fell about 0.3% after hitting a new high on Friday. The S&P 500 (^GSPC) fell about 0.3%, while the Nasdaq Composite (^IXIC) fell 0.5%.

The yield on the benchmark 10-year Treasury (^TNX) hit 4% for the first time since August as hopes of another 50-basis-point cut from the Federal Reserve faded after a stronger-than-expected jobs report expected since September.

Oil prices extended gains on Monday after their biggest weekly gain in more than a year as markets awaited Israeli retaliation against Iran over its missile barrage last week.

West Texas Intermediate (CL=F) crude futures advanced more than 1 percent to trade above $75 a barrel after gaining more than 9 percent last week. Brent (BZ=F) futures, the international benchmark, also advanced more than 1 percent to trade above $79 a barrel.
Monday, October 7, 2024 at 14:38 GMT+2

Pfizer shares rose on reports that Starboard took the $1 billion stake

Shares of Pfizer ( PFE ) rose 2.6% in pre-market trading as investors reacted to several media reports that activist investor Starboard Value took a $1 billion stake in the pharmaceutical giant.

Starboard has approached Pfizer executives Ian Read and Frank D’Amelio to help turn the tide at the drugmaker, various media outlets reported, citing anonymous sources. Pfizer, the maker of the world’s first approved COVID-19 vaccine, has struggled to maintain its dominance after the pandemic. Read and D’Amelio have expressed interest in helping Starboard, The Wall Street Journal reported. Starboard’s plans and the changes it would make at Pfizer are unclear.

Early Monday morning moves in the stock will put it in the positive for the year, but the stock is well below record highs near $60 in 2022.

Pfizer is scheduled to report earnings on October 29. Wall Street analysts expect the company to report revenue of $14.8 billion, up about 12% from a year earlier. Only half of analysts who cover the stock recommend buying it, according to Bloomberg data.