Sept 20 (Reuters) – Wall Street’s main indexes eased on Friday as investors held back after a rally in the previous session that was sparked by an oversized interest rate cut by the Federal Reserve.
The S&P 500 and the Dow hovered near their record highs and were on track for weekly gains of about 1%, along with the tech-heavy Nasdaq.
The Dow Jones Industrial Average (.DJI), opens new tab fell 69.74 points, or 0.17%, to 41,955.45, the S&P 500 (.SPX), opens new tab lost 20.53 points, or 0.36%, to 5,693.11 and the Nasdaq Composite (.IXIC), opens new tab lost 83.90 points, or 0.47%, to 17,932.00.
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Most S&P 500 sectors traded lower. Industrial stocks (.SPLRCI), opens new tab were at the bottom with a 0.7% loss, while utilities (.SPLRCU), opens new tab were at the top with a 1.8% rise.
Tech stocks (.SPLRCT), opens new tab, weighed down by Nvidia (NVDA.O), opens new tab, dipped 0.4% after notching their best day in over a week in the previous session.
All three main indexes logged their best day in over a month on Thursday with the S&P 500 and the Dow closing at all-time highs. The S&P 500 is set to buck the historical trend of September being weaker for U.S. equities on average.
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The Fed commenced its monetary easing cycle earlier in the week with a 50-basis-point cut and projected a period of steady economic growth and low unemployment and inflation.
Michael Matousek, head trader at U.S. Global Investors, said a bigger cut is making people think of “risks below the surface they do not know about” and want to position for “risks of the unknown”.
“The other question is if the soft landing is going to work, so that might be wearing on investors a little bit, raising some concerns.”
Traders now see a 53.7% probability of a 25 bps cut in November, as per the CME Group’s FedWatch tool, compared with 60.4% earlier in the day.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 19, 2024. REUTERS/Brendan McDermid Purchase Licensing Rights, opens new tab
Fed Governor Christopher Waller lifted the media blackout period for policymakers and said estimates of weak upcoming inflation readings cemented the case for the central bank’s outsized move, as per a report.
Some market volatility is expected in the day, as options and futures linked to stock indexes and individual stocks are set to expire simultaneously on the third Friday of the last month of the quarter, in an event called “triple witching”.
FedEx (FDX.N), opens new tab plunged 14.6% after lowering its full-year revenue forecast, sending the Dow Jones Transport index (.DJT), opens new tab down 3.2%.
Nike (NKE.N), opens new tab jumped 6.2% after saying that former senior executive Elliott Hill will rejoin the company to succeed John Donahoe as CEO.
Constellation Energy (CEG.O), opens new tab gained 15.1% after signing a 20-year power supply deal with Microsoft (MSFT.O), opens new tab that could help restart one of its nuclear power plant units.
A rebalancing of the main indexes is also expected before the market opens on Sept. 23.
Historically, equities have performed well in a rate-cutting cycle. However, the outlook appears bleak with the S&P 500’s valuations high above its longterm average.
Declining issues outnumbered advancers by a 2.28-to-1 ratio on the NYSE and by a 2.35-to-1 ratio on the Nasdaq.
The S&P 500 posted 19 new 52-week highs and one new low while the Nasdaq Composite recorded 70 new highs and 65 new lows.
