US stocks end the week on a neutral note
US stocks closed almost unchanged on Friday. Investors decided to take a break after the impressive growth of the previous trading day, when a sharp rise in quotes was caused by another rate hike by the US Federal Reserve. However, the dynamics of Nike shares made a positive contribution, helping the Dow index approach new highs.
Moderate growth after August rally
After the indices showed the largest daily gain since mid-August the day before, the main market dynamics were restrained. Despite this, the week ended with a 1% or more increase in quotes for key indices.
The market expects further rate cuts
Investors' hopes for a further rate cut were reinforced by statements from Fed Chairman Christopher Waller. His comments increased expectations that the rate would be cut by 50 basis points at once at the November meeting. This happened against the backdrop of a fresh rate cut on Wednesday, also by 50 basis points.
Different opinions within the Fed
At the same time, Fed member Michelle Bowman noted that she would prefer a more cautious reduction, which caused disagreement in assessments of the regulator's further steps.
Experts advise caution
"The market is in the process of adjusting, as some participants expected a significant reduction, but many were skeptical," said Sid Vaidya, chief wealth strategist at TD Wealth. In his opinion, it is important to act with greater caution now, since economic growth is expected to slow, and high valuations of large companies may be overstated.
Minor Index Fluctuations Amid Rate Expectations
On Friday, the Dow Jones Industrial Average posted a modest gain of 38.17 points (0.09%) to end at 42,063.36. At the same time, the S&P 500 was down slightly by 11.09 points (0.19%) to 5,702.55, and the Nasdaq Composite lost 65.66 points (0.36%) to end the trading session at 17,948.32.
Weekly Summary: All Major Indices Up
Despite a mixed finish to the week, the major indices posted solid gains. The S&P 500 added 1.36%, the Nasdaq rose 1.49%, and the Dow Jones ended the week with a gain of 1.62%.
Rate Cut Expectations: Investors on Guard
According to CME's FedWatch tool, market participants are confident that the Federal Reserve will cut rates by at least 25 basis points at its November meeting. The probability of a larger 50 basis point cut is estimated at almost 49%.
Utilities Lead the Gain
Utilities were the strong performers of the week, rising 2.69% to a new record high, led by Constellation Energy, which jumped 22.29% after it announced a partnership with Microsoft to revive the Three Mile Island nuclear power plant in Pennsylvania.
Intel Keeps the Dow Afloat
The Dow gained additional support as Intel shares rose 3.31%. The rise followed a Wall Street Journal report that Qualcomm might acquire Intel, which prompted a positive reaction from investors.
Fed Easing to Boost Growth
The Federal Reserve began its monetary easing cycle on Wednesday, boosting market confidence. The U.S. economy is expected to continue to grow steadily, with low unemployment and subdued inflation providing a favorable environment for investors.
FedEx Under Pressure After Guidance Revision
FedEx shares (FDX.N) plunged 15.23% after the company cut its full-year revenue forecast. That sent the Dow Jones Transport (.DJT) index sliding 3.53%, its steepest drop since late April 2023.
Nike Strengthens Its Position Amid Executive Changes
Nike (NKE.N) shares soared 6.84% after the company announced that Elliott Hill, its former chief executive, will be returning to replace John Donahoe as CEO. The move sparked investor optimism and helped boost the company's value.
'Triple Witch' Boosts Volume
Friday's session was marked by a so-called "triple witch," when options and futures linked to stock indexes and individual stocks expired simultaneously. This phenomenon is traditionally accompanied by a surge in market activity and was responsible for the heaviest trading volume in 2024.
Stocks in a Rate Cut Environment: An Uncertain Outlook
While historically lower interest rates have been good for stocks, the current situation is worrisome. S&P 500 valuations are well above their long-term averages, raising concerns among analysts about further gains.
Market Balance: Bears Prevail
On the New York Stock Exchange, decliners outnumbered gainers by 1.66 to 1. On the Nasdaq, the ratio was 1.87 to 1 in favor of the bears, indicating a generally negative mood among market participants.
New Highs and Lows
The S&P 500 recorded 32 new yearly highs and one low, while the Nasdaq posted 114 new peaks and 105 new lows in the latest trading session. Trading volume on U.S. exchanges was nearly 20 billion shares, well above the 20-day average of 11.48 billion.
Conflicting Views at the Fed Stir Debate on Inflation
Days after the rate cut, two key U.S. Federal Reserve officials expressed opposing views on the outlook for inflation, underscoring the extent of the debate within the regulator about the need for next steps. While Chairman Jerome Powell insisted the rate cut was made to support robust economic growth, it was not a response to weak employment data.
The market is expecting more rate cuts
Investors are already pricing in the possibility of a 25 basis point rate cut in November. The probability of a larger 50 basis point rate cut is also high, at 48.9%, according to CME FedWatch data. Those expectations are heightened by growing talk of potential economic risks.
Unknown risks worry investors
Michael Matousek, chief trader at U.S. Global Investors, said the latest rate cut has raised concerns among market participants about hidden risks. "Investors are starting to think that they may not be seeing all the threats that are under the surface and are bracing for the unexpected," he said. He also added that the question remains whether the Fed will be able to achieve a "soft landing," or control inflation without triggering a recession, which is also a concern.
Nike Supports Dow Jones Growth
The main driver of the Dow's rise was a jump in Nike shares, which rose after news that Elliott Hill had returned to the company as CEO. The personnel decision had a positive impact on the stock's dynamics and supported the index amid overall market volatility.
Global Stocks Slip
The MSCI World Equity Index slipped 0.21% to 837.69 after hitting a record high on Thursday.
Utilities Lead the Gains
The utilities sector was the best performer in the market, with Constellation Energy shares soaring more than 20%. The main reason for the rise was the news of a partnership with Microsoft that involves reopening a mothballed part of a nuclear power plant to support artificial intelligence projects.
Bank of Japan remains cautious
The Bank of Japan decided to leave interest rates unchanged after an eventful week. This decision coincided with market expectations, but the bank's governor Kazuo Ueda made it clear that a sharp rate hike is not expected in the near future. He also noted that economic uncertainty in the United States and high volatility in global markets could influence the regulator's future decisions.
Yen loses ground amid BOJ statements
After the BOJ meeting, the yen weakened against the US dollar, falling by 0.94% to 143.97 per dollar. The dollar, in turn, strengthened and reached a two-week high against the Japanese currency. The dollar index, which tracks the dollar against a basket of major world currencies, rose by 0.12%, stopping at 100.79.
European shares down on carmakers
European markets also suffered losses, with the STOXX index slipping from two-week highs. Carmakers led the decline after Mercedes-Benz announced a profit target revision, citing weaker demand in China.
China: Stable rates, cautious growth
In China, the central bank left its benchmark lending rates unchanged despite expectations of a cut. Against this backdrop, the key blue-chip index rose 0.2%, but remained near the seven-month low hit earlier this week.
Hopes for stimulus in China grow
A series of weak economic data in recent days has fueled optimism among investors expecting aggressive measures to support the world's second-largest economy. Economic stimulus could have a significant impact on global markets, which is especially important amid the current volatility.
Sterling Recovers from Weakness
The British pound weakened on Thursday after the Bank of England decided to keep interest rates unchanged. However, by Friday the pound had begun to strengthen, rising 0.23% to $1.3314. The currency was supported by positive data on UK retail sales for August, which beat analysts' forecasts.
Commodities Continue to Strengthen
Commodity markets maintained their upward momentum amid global economic changes. Gold hit a record high of $2,614 an ounce, indicating increased demand for safe haven assets amid uncertainty.
Oil Prices Show Weekly Gains
Despite a slight decline on Friday, oil futures ended the week with strong gains. Brent crude fell 0.52% to $74.49 a barrel, while U.S. WTI crude fell 0.4% to $71.92 a barrel. However, both benchmarks are up more than 4% for the week, reflecting robust energy demand.
