US close: Stocks extend gains as rate-cut expectations rise

dl wall street wall st new york city nyc ney york stock exchange nyse nasdaq dow jones industrial average djia trading us usa united states of america 2023120702241 — Sharecast graphic / Josh White

US stocks delivered another day of gains on Monday, helped by dovish comments from a prominent Federal Reserve policymaker, as the S&P 500 and Nasdaq extended their winning streaks into the eight straight session.

The S&P 500 finished 1% higher at 5,608.25, sitting just 1% shy of its all-time closing high of 5,667.20 set last month. The index has now gained 7.6% since 7 August.

The Nasdaq jumped 1.4% to 17,876.77, while the Dow rose for the fifth consecutive day, gaining 0.6% to 40,896.53.

This week's primary focus will be Federal Reserve chairman Jerome Powell's speech at the central bank's symposium in Jackson Hole, Wyoming on Friday, with market participants hoping to gain more insight into the Fed's position on future rate cuts. Minutes from the Fed's most recent policy meeting will also be out on Wednesday.

"The start of the week kicked off on a positive footing for stock index bulls with mostly further advances being made in low volume and volatility ahead of Wednesday's FOMC minutes and the end of week Jackson Hole symposium," said Axel Rudolph, senior technical analyst at IG.

The US dollar dropped to a seven-month low ahead of Powell's comments later this week, with the Dollar Index slipping 0.1% to 101.20.

"Rate cut expectations of at least 25 basis points at the Fed's September meeting and 94 basis points before year-end continue to put pressure on the US dollar," Rudolph said.

Nevertheless, Minneapolis Fed president Neel Kashkari was helping equity market sentiment on Monday after saying that it was now time for the central bank to begin discussing potentially cutting US benchmark interest rates at its September meeting.

Kashkari told The Wall Street Journal: "The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have."

He stated the Federal Reserve had made good progress on taming inflation but noted the labour market was showing "concerning signs". Kashkari also stated that he did not see any reason to lower interest rates in increments of larger than a quarter percentage point due to layoffs remaining low and unemployment claims seemingly not suggesting a notable deterioration.

Market movers

Shares of The Estée Lauder Companies were falling as the cosmetics giant announced the retirement of its CEO after 16 years and gave a cautious outlook for the coming financial year. The news came as the company unveiled its results for the past financial year, in which net sales were down 2% at $15.6bn and diluted earnings per share dropped 61% to $1.08.

Chipmaker AMD jumped 5% on the back of an announcement to take over server maker ZT Systems for $4.9bn.

Sector peer Nvidia was also in demand, rising 4% ahead of its second-quarter earnings next week, with investors cheered by a positive research report from Goldman Sachs. The bank reiterated a 'buy' rating on the stock, citing its price-to-earnings ratio of 42 – well below its historical average.

HP dropped nearly 4% after analysts at Morgan Stanley cut their position on the stock from 'overweight' to 'equal weight', while McDonald's saw a 3% boost after Evercore ISI lifted its target price on the shares from $300 to $320 and reiterated an 'outperform' rating.

Dow Jones - Risers

McDonald's Corp. (MCD) $287.55 3.25%
Intel Corp. (INTC) $21.52 3.11%
Amgen Inc. (AMGN) $327.97 2.03%
Walt Disney Co. (DIS) $90.82 1.70%
Travelers Company Inc. (TRV) $218.90 1.10%
Cisco Systems Inc. (CSCO) $49.98 1.05%
Salesforce.Com Inc. (CRM) $265.38 0.94%
American Express Co. (AXP) $254.05 0.93%
Microsoft Corp. (MSFT) $421.53 0.73%
JP Morgan Chase & Co. (JPM) $215.46 0.69%