Dow adds 200 points for first close above 43,000; S&P 500 hits another all-time high
The S&P 500 and the Dow Jones Industrial Average rose to fresh records Monday as investors awaited the next batch of key corporate earnings.
The broad market index climbed 0.77% to 5,859.85, while the 30-stock Dow advanced 201.36 points to 43,065.22. Both averages hit all-time highs and closed at records, with the Dow ending the session abovethe43,000markforthefirsttime.The Nasdaq Composite added 0.87%, closing at 18,502.69.
McDonald’s, UnitedHealth Group and Apple led the Dow higher. Technology continued its upward run and was the best-performing sector in the S&P.
Bank of America, Goldman Sachs and Johnson & Johnson report their latest results on Tuesday, while Morgan Stanley and United Airlines are set to release results Wednesday. Walgreens Boots Alliance, Netflix and Procter & Gamble are also scheduled to post earnings this week.
Investor optimism sees biggest jump since June 2020, survey shows
Global investor optimism posted its biggest jump since June 2020 in October due to Federal Reserve rate cuts, stimulus pledges from China and expectations of a soft landing for the U.S. economy, a BofA survey of fund managers published on Tuesday showed.
Cash allocations dropped to 3.9% from 4.2% in September month, while equity allocations rose to a net 31% overweight, andbondallocations suffered a record drop to a net 15% underweight, according to the survey.
"Our broadest measure of (fund manager survey) sentiment, based on cash levels, equity allocation, and economic growth expectations, rose from 3.8 to 5.6, its largest monthly rise since Jun’20," BofA said.
The survey showed investors expect the upcoming U.S. election will most likely impact trade policy (47%), followed by geopolitics (15%) and taxation (11%).
In terms of how investors are positioning considering the soft-landing narrative, the survey showed the biggest rise in global equity allocation since June 2020.
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Chip stocks fall as ASML's weak outlook raises concerns of nonAI chip demand
Semiconductor stocks in the United States and Asia fell after chip equipment maker ASML (ASML.AS), opens new tab cut its annual sales forecast over weak non-AI chip demand.
AI chip giant Nvidia (NVDA.O), opens new tab, which had briefly surpassed Apple as the world's most valuable company the previous day, dropped 4.5%, wiping out about $158 billion from its market cap, widening the gap with Apple's value of $3.56 trillion.
Other chip firms, including AMD (AMD.O), opens new tab, Intel (INTC.O), opens new tab, Arm , Broadcom (AVGO.O), opens new tab and Micron (MU.O), opens new tab, fell between 3.2% and 5% at Tuesday's close, which dragged the Philadelphia SE Semiconductor Index down nearly 5% and weighed on the Nasdaq index (.IXIC), opens new tab
U.S.-listed shares of ASML closed 16% down after the Dutch company published results ahead of schedule in an apparent error, reporting weak bookings, lowering forecast, and indicating slower chip demand recovery outside the AI sector.
Despite the surge in demand for AI-related chips, the company reported that other segments of the semiconductor market remain weaker than expected, with logic chip makers delaying orders and memory chip makers only planning "limited" new capacity additions
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Traders bet the ECB's rate-cut floodgates are open
Traders raised their bets on quick-fire European CentralBankratecutsonThursday,takingthebank's first consecutive rate cut in 13 years as a green light from policymakers that a speedier easing cycle has begun.
A worsening economic outlook and signs that inflation is increasingly under control prompted the ECB to cut its deposit rate by 25 basis points (bps) to 3.25%, following a September move, in the first backto-back rate cut since 2011.
Policymakers repeated that they were not committing to a particular rate path and would keep monetary policy restrictive as long as necessary to make sure they had tamed inflation.
But hearing little pushback from ECB chief Christine Lagarde against market expectations, traders added to rate-cut bets and pushed the euro down further.
"Lagarde said one thing and one thing only, and that's that the ECB is data-dependent," said Seema Shah, chief global strategist at Principal Asset Management.
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Case for quick ECB rate cuts mounts as growth weakens and inflation is tamed
Euro zone inflation could ease more quickly than previously thought and economic growth is also likely to remain weak, ECB policymakers and fresh surveys said on Friday, reinforcing the case for a rapid pace of interest rate cuts in the months ahead.
The ECB lowered interest rates for the third time this year on Thursday on moderating price pressures. Investors now see rate cuts at each of the central bank's next four or five meetings as inflation is within striking distance of its 2% target and the bloc flirts with recession.
Sources close to the ECB's deliberations said that inflation could ease to 2% a few quarters sooner than earlier thought. This prompted some rate setters to make the case on Thursday for dropping a pledge to keep policy tight, the sources said, an implicit signal that more rate cuts are coming.
Speaking in blog post on Friday, Estonian central bank Governor Madis Müller also argued that the outlook had changed markedly in since the ECB's last projections in September.
"Economic growth will be more modest than could have been expected just a month or two ago, and this will probably also reduce the pressure for price increases," Müller said.
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https://www.reuters.com/markets/europe/ecb-survey-shows-quicker-return-inflation-target-2024-10-18/