U.S. Stocks Edge Higher as Investors Mull Impact of Fed Rate Cuts

U.S. stocks closed moderately higher on Monday, driven by investor anticipation following the Federal Reserve's recent rate cut. The stock market's upward trend contrasted with September's typical performance, supported by Fed officials hinting at future cuts. Key economic indicators and corporate performances influenced market movements.

U.S. stocks finished the day with modest gains on Monday, as investors continued to digest last week's significant rate cut by the Federal Reserve. The markets showed resilience, defying the traditionally weak performance of September, as steady factory activity and comments from Fed policymakers bolstered sentiment.

The central bank's decision to implement an outsized 50 basis-point cut last week propelled major indexes to monthly gains. Investors tuned into remarks from three reserve bank presidents on Monday, seeking insight into the Fed's rationale for initiating its easing cycle.

Leading voices like Raphael Bostic, Neel Kashkari, and Austan Goolsbee endorsed further rate reductions before year-end. Consequently, traders, using tools like the CME Group's FedWatch, initially forecast a bolder Fed move at November's meeting. Yet, changing market conditions now suggest a coin-toss probability, with expectations of a 74 basis-point reduction by year's end, according to LSEG data.

On the data front, September saw stable U.S. business activity and a sharp rise in the prices of goods and services, marking the fastest increase in six months and hinting at potential inflationary pressures ahead.

CFRA Research's chief investment strategist, Sam Stovall, noted that investors are cautiously optimistic about a potential soft landing. The Dow Jones Industrial Average gained 61.29 points, or 0.15%, while the S&P 500 and Nasdaq rose by 16.02 points and 25.95 points, respectively, showcasing growth across eight of the 11 S&P 500 sectors.

Energy stocks led with a 1.31% rise, though healthcare stocks saw a slight decline. Rate-sensitive stocks like Tesla and Meta Platforms enjoyed significant gains after positive analyst forecasts. The Russell 2000 index, mirroring small-cap stocks, fell by 0.25%.

This week, the market's focal point is Friday's personal consumption expenditures data, which serves as the Fed's primary inflation indicator. Analysts predict it will be the most influential factor for market direction.

In corporate news, Intel shares surged by 3.05% following reports of a prospective $5 billion investment by Apollo, whereas General Motors stocks dropped by 1.72% after a downgrade by Bernstein.

Trading data showed a positive breadth, with advancing issues outnumbering decliners on the NYSE. The S&P 500 and Nasdaq Composite both reported a notable number of new highs, despite mixed individual stock performances.

(With inputs from agencies.)