Dow Hits One-Month High as Investors Rotate Amid Rate Cut Bets

A broad stock market rally drove the Dow to a one-month high, with investors rotating from AI-linked stocks to laggards, anticipating Federal Reserve interest rate cuts. Nvidia slid, dragging the chip stocks index, while the energy sector surged. The upcoming PCE price index report is a key focus for investors.

A broad stock market rally pushed the blue-chip Dow to a one-month high on Monday, as investors rotated out of AI-linked stocks and added some laggards to their portfolios, betting on Federal Reserve interest rate cuts this year.

Nvidia slid for a third session, down 5.4% as market watchers cited profit taking in the semiconductor bellwether after its meteoric rise last week to the world's most valuable company. Other chip stocks including U.S. shares of Taiwan Semiconductor Manufacturing, Broadcom, Marvell Technology and Qualcomm dropped between 2.1% and 4%, dragging the chip stocks index down 2.3%.

"The market's selling some of the winners and buying some of the laggards here," said Jack Janasiewicz, lead strategist at Natixis Investment Managers. "It's a little bit of a nod to looking out over the inflation data that is coming out on Friday, as expectations are for a pretty soft print." Technology and the consumer discretionary were the only two decliners among the 11 S&P 500 sector indexes. Meanwhile, the energy sector was up 2.5%.

The Dow Jones Industrial Average jumped over 0.5% intraday, on course for a five-day winning streak. The small-caps index Russell 2000 also hit its highest in over a week, signaling broader market gains. "If inflation comes in softer, the market could broaden out quite significantly... The breadth will get wider and everything beyond the AI stocks," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.

The biggest event on investors' radar for the week is Friday's personal consumption expenditures (PCE) price index report, the Fed's preferred measure of inflation, expected to show a moderation in price pressures. Investors still expect about two rate cuts this year, pricing in a 61% chance of a 25-basis-point cut in September, as per LSEG's FedWatch. The Fed's own latest projection is for one rate cut likely in December.

At 02:03 p.m. the Dow rose 225.94 points, or 0.58%, to 39,376.27, the S&P 500 lost 6.84 points, or 0.13%, to 5,457.78 and the Nasdaq Composite lost 147.38 points, or 0.83%, to 17,541.98. Other data this week include durable goods, weekly jobless claims and final first-quarter GDP figures, the annual Russell index reconstitution. Some quarterly earnings reports also are due.

On Thursday, President Joe Biden will debate Republican rival Donald Trump in Atlanta, which could influence the outcome of a race for the November election that opinion polls show as neck-and-neck. Meta Platforms rose 0.23% after a report the Facebook parent has discussed integrating its generative AI model into Apple's recently announced AI system for iPhones. Apple's shares also climbed 0.77%.

RXO leapt over 21% on plans to buy United Parcel Service's Coyote Logistics business unit for $1.025 billion. Advancing issues outnumbered decliners by a 2.27-to-1 ratio on the NYSE. There were 141 new highs and 39 new lows on the NYSE.

The S&P 500 posted 33 new 52-week highs and one new low while the Nasdaq Composite recorded 41 new highs and 101 new lows.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)