By Ankika Biswas, Lisa Pauline Mattackal and Carolina Mandl
(Reuters) – The Dow rose to a one-month high on Monday, while the Nasdaq fell more than 1% as investors turned away from AI-related stocks and added some holdings to their portfolios, betting on rate cuts of Federal Reserve interest this year.
The S&P 500 and Nasdaq ended lower in the rotation out of tech stocks, whose big gains have led this year’s rally. However, nine of the S&P 500’s 11 major industry sectors gained ground.
Nvidia fell 6.68% for a third session, as market watchers cited profit-taking in the semiconductor bar after last week’s meteoric rise made it the world’s most valuable company.
Other chip stocks, including U.S. shares of Taiwan Semiconductor Manufacturing, Broadcom, Marvell Technology and Qualcomm, fell between 3.53% and 5.7%, dragging the index of chip stocks down 3.02%.
“The market is selling some of the winners and buying some of the laggards here,” said Jack Janasiewicz, chief strategist at Natixis Investment Managers. “It’s a bit strange to see the inflation data coming out on Friday, as expectations are for a fairly soft print.”
Technology and consumer discretionary were the only two decliners among the 11 S&P 500 sector indexes, while the energy sector was the best performer, advancing 2.73%.
“There has been a rotation in some of the value areas of the market such as financials, energy and utilities. Energy has the added benefit of a small increase in oil prices,” said Ed Clissold, chief US strategist at Ned Davis Research. . Oil prices rose on Monday, boosted by stronger expectations of demand for the fuel, and shares of energy and oilfield services companies rose.
The Dow Jones Industrial Average jumped and recorded a five-day winning streak. The Russell 2000 small-cap index also hit its highest in more than a week, signaling broader market gains.
With the exception of Nvidia and other chip stocks, “the rest of the market is behaving positively on the expectation that we’re still on track for a case of a soft landing base,” said Carl Ludwigson, managing director at Bel Air Investment Advisors.
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, which is expected to show a moderation in price pressures.
Investors still expect about two rate cuts this year, with a 61% chance of a 25 basis point cut in September, according to LSEG’s FedWatch. The Fed’s latest projection is for a possible rate cut in December.
San Francisco Fed President Mary Daly said she does not believe the U.S. central bank needs to cut rates before policymakers are confident inflation is heading toward 2%.
The S&P 500 lost 15.73 points, or 0.29%, to end at 5,448.89, while the Nasdaq Composite lost 190.19 points, or 1.09%, to 17,499.17. The Dow rose 257.99 points, or 0.66%, to 39,408.32.
Other data this week includes durable goods, weekly jobless claims and final first-quarter GDP figures, the annual rebuild of the Russell index. Some quarterly earnings reports are also outstanding.
On Thursday, President Joe Biden will debate Republican rival Donald Trump in Atlanta, which could affect the outcome of a race for the November election that opinion polls show as a tie.
Meta Platforms rose following a report that the Facebook parent has discussed integrating its generative AI model into Apple’s recently announced AI system for the iPhone. Apple shares also rose.
RXO jumped on plans to buy United Parcel Service’s Coyote Logistics business unit for $1.025 billion.
Advances outnumbered decliners by a 2.25-to-1 ratio on the NYSE. There were 179 new highs and 48 new lows on the NYSE.
The S&P 500 hit 35 new 52-week highs and one new low, while the Nasdaq Composite recorded 49 new highs and 128 new lows.
Volume on US exchanges was 10.94 billion shares, compared with the full-session average of 11.92 billion over the past 20 trading days.
(Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru, and Carolina Mandl in New York; Editing by Maju Samuel and David Gregorio)