US close: Dow hits new record, but markets subdued ahead of Fed

Stocks put in a mixed performance on Monday, with the Nasdaq falling into the red but the Dow reaching a new all-time high, though gains were modest as investors adopted a cautious approach ahead of a pivotal Federal Reserve meeting on Wednesday.

The Dow Jones Industrial Average rose 0.6% to a new closing high of 41,622.08, surpassing the previous record of 41,563.08 reached on 30 August. A late rally saw the S&P 500 eke out a 0.1% gain after trading in the red for most of the session, but the Nasdaq fell 0.5%.

The subdued session follows some impressive gains made last week, with the S&P 500 and Nasdaq surging 4% and 6%, respectively, after five consecutive positive sessions.

While an easing of monetary policy has been widely expected for some time, the jury's still out on the size of potential rate cut when the Fed's two-day policy meeting concludes this week, with investors divided between a 25 basis-point (bp) and 50bp reduction in the Federal Funds Rate.

"The Fed is expected to twist but there is a degree of uncertainty here [...], as investors ponder how deep that first cut might be," said AJ Bell's head of financial analysis Danni Hewson.

"Odds of a 50bp slice have improved since last week, with an undercurrent of nervousness about the strength of the US economy still rippling through markets."

The only major economic data of the day was the NY Empire State manufacturing index, which jumped more than expected, with business activity in the area rising for the first time in nearly a year on the back of a climb in new orders and a big increase in shipments. The headline general business conditions index rose 16 points to 11.5, from -4.7 in August, beating the -3.9 reading predicted by economists.

Apple takes a dive

Apple shares fell 3% on reports that preorders for the iPhone 16 Pro were down on the first weekend of sales compared with the previous model – especially in China. In a research note, Barclays pointed to a "softer start [...] due to weakening consumer spend, macro pressure and competition".

Shares in Bausch & Lomb surged 14% amid speculation that the North American contact lens and eye care products supplier is exploring a potential sale. According to the Financial Times, Bausch & Lomb has hired advisers to test the waters with potential buyers as it looks to separate itself from its heavily indebted parent company, Bausch Health, whose shares also leapt 11%.

Aluminium producer Alcoa was also a high riser, jumping 6%, after announcing the sale of its 25.1% stake in Saudi miner Ma'aden for $1.1bn.

Semiconductor giant Intel gained 6% on the back of weekend reports that it might receive $3.5bn in federal grants to produce chips for the Pentagon.