The S&P 500 surged to a record close on Monday, wrapping up a winning month and quarter for the broader market. Investors navigated a choppy session, with stocks rallying in the final hour despite earlier volatility triggered by comments from Federal Reserve Chair Jerome Powell. Powell suggested further rate cuts could be on the horizon, though he tempered expectations by emphasising the absence of a predetermined path for monetary policy. While the Dow Jones Industrial Average and Nasdaq also posted gains, market participants remain cautious as attention shifts to upcoming labour data, which will provide further insight into the strength of the US economy.

Key Takeaways:

  • S&P 500 Hits Record Close: The S&P 500 gained 0.42%, closing at a record high of 5,762.48, marking a strong finish to the month and quarter. The index’s rise reflects growing investor confidence, despite earlier volatility linked to Federal Reserve guidance.
  • Dow Posts Slight Gain: The Dow Jones Industrial Average added 17.15 points, or 0.04%, to close at 42,330.15. While modest, this uptick helped push the index to record levels, capping a month where it advanced 1.9% and finishing the quarter more than 8% higher.
  • Nasdaq Composite Rises: The tech-heavy Nasdaq Composite rose 0.38%, ending the day at 18,189.17. The index also posted a monthly gain of 2.7%, supported by strong performances in the technology sector.
  • European Markets Close Lower: The pan-European Stoxx 600 fell 0.95% on Monday, as nearly all sectors closed in negative territory. Auto stocks were the biggest losers, declining 4%, with Stellantis shedding nearly 13% on a profit warning. France’s CAC 40 dropped 156 points, or 2.00%, as shares of Renault and other automakers also fell sharply. Germany’s DAX declined 149 points, or 0.76%, weighed down by losses in the industrial sector. In contrast, the FTSE 100 gained 0.89%, closing 72.83 points higher, driven by strength in oil and gas stocks, which were among the only sectors to post gains in Europe.
  • Asian Markets Mixed as Mainland China Surges: Asian markets ended mixed on Monday. Mainland China’s CSI 300 saw its best trading day in 16 years, surging 8.48% to close at 4,017.85. The rally was driven by healthcare and tech stocks, following optimism around China’s stimulus measures and better-than-expected economic data. However, Japan’s Nikkei 225 tumbled 4.8% to 37,919.55, as weak industrial production data and declines in real estate stocks weighed heavily on the index. South Korea’s Kospi fell 2.13% to 2,593.27, while Australia’s S&P/ASX 200 rose 0.7% to close at an all-time high of 8,269.8. The mixed results across the region reflect ongoing concerns about global growth, particularly in light of China’s manufacturing contraction and Japan’s industrial weakness.
  • Oil Prices Rise Slightly: US crude oil prices inched up 0.26%, closing at $68.36 per barrel, while Brent crude slipped by 0.29% to finish at $71.77 per barrel. Despite the slight rise in US crude, oil markets remain under pressure due to weak demand from China and concerns about oversupply as OPEC+ prepares to increase production later in the year. US crude prices have now posted three consecutive monthly losses, with a 7% decline in September alone, driven by rising supplies and softening global demand. Brent crude has seen a similar trajectory, falling nearly 9% for the month.
  • Treasury Yields Tick Higher: US Treasury yields moved higher on Monday, with the 10-year yield rising by 3 basis points to 3.787% and the 2-year yield climbing 7 basis points to 3.637%. Investors remain focused on inflation and interest rate outlooks, particularly in light of Powell’s comments about future rate cuts. Despite some uncertainty, the market is pricing in a more cautious approach from the Federal Reserve, with yields reflecting this sentiment. 

FX Today:

  • EUR/USD Struggles to Break Resistance: The EUR/USD pair traded at 1.1130, down 0.20% on Monday, as the bulls lost momentum in the face of resistance at 1.1152. The 50-period SMA at 1.1152 provided a cap on upward movement, while the 100-period SMA around 1.1112 and the 200-period SMA at 1.1101 offered strong support. While the overall trend remains bullish, buyers seem hesitant to push the price higher. If EUR/USD manages to break above 1.1152, it could target the next resistance level at 1.1200. However, a break below the 100-period SMA at 1.1112 could signal further downside pressure, with the next support at 1.1050.
  • GBP/USD Pulls Back After Recent Gains: GBP/USD traded lower at 1.3361, slipping 0.30% as bullish momentum from earlier in the week faded. The pair struggled to maintain its rally above the key resistance level of 1.3400, leading to a pullback towards the 50-period SMA at 1.3341. Despite this short-term weakness, GBP/USD remains above the 100-period SMA at 1.3233 and the 200-period SMA at 1.3163, suggesting that the broader uptrend is still intact. If the pair breaks below 1.3341, it could test the next support at 1.3233. On the upside, a move back above 1.3400 would reignite the bullish sentiment, with the next resistance at 1.3450.
  • AUD/USD Fails to Sustain Gains: AUD/USD was down by 0.46% on Monday, trading at 0.6907, as sellers capped the recent rally. The pair struggled to break above the resistance at 0.6938, with the 50-period SMA at 0.6906 providing temporary support. While the broader trend remains bullish, supported by the 100-period SMA at 0.6778 and the 200-period SMA at 0.6755, short-term weakness persists. A break below the 50-period SMA could lead to a deeper correction towards the 100-period SMA at 0.6778. On the upside, a move above 0.6938 would open the door for a potential retest of 0.7000.
  • USD/JPY Rises Following Powell’s Comments: USD/JPY climbed over 1% to trade at 143.60 on Monday, following Federal Reserve Chair Jerome Powell’s remarks that hinted at potential future rate cuts. Despite the gains, the pair remains downward biased, trading below the 200-day moving average, indicating that sellers still control the market. If USD/JPY breaks above 144.00, the next resistance levels would be at 145.00 and the 50-day moving average at 145.92. On the downside, a failure to hold above 144.00 could see the pair fall back towards 143.46, with 143.00 acting as a key support level.
  • Gold Holds Above Support Despite Small Dip: Gold prices dipped 0.39% on Monday to close at $2,627.40, consolidating just below recent highs after hitting an intraday peak of $2,638.36. Despite the pullback, the metal remains in an overall uptrend, with the 50-period SMA at $2,632.13 acting as temporary support. If gold continues to decline, the next support levels lie at the 100-period SMA at $2,586.49, followed by the 200-period SMA at $2,543.26. A breach below these levels could signal a deeper correction towards $2,500. On the upside, if gold breaks above $2,638.36, it could target resistance at $2,650, with $2,685 as the next potential target.

Market Movers:

  • Nio Rises on China Cash Injection: Nio shares climbed 2% on Monday after the electric vehicle maker announced a significant cash injection of 13.3 billion yuan into its Nio China business. The deal is expected to reduce Nio Inc.’s stake in Nio China to 88.3%, down from its current 92.1%. 
  • Stellantis Plummets on Profit Warning: Stellantis saw its stock plunge nearly 13%, hitting a new 52-week low, after the automaker issued a full-year profit warning. The company cited deteriorating global industry conditions and intensifying competition from China as key factors behind the downward revision. The ripple effect also dragged down other automakers, with GM shares falling almost 4% and Ford dropping more than 2% in sympathy.
  • Alibaba Slips Despite Mortgage Rate Cuts: Alibaba shares ended the day down 1%, despite earlier gains following news that China’s central bank would ask domestic banks to reduce mortgage rates on existing home loans before October 31. 
  • CVS Health Jumps on Hedge Fund Interest: CVS Health shares gained 2% after news broke that hedge fund Glenview Capital intends to meet with the company’s executives to discuss strategies to boost its struggling business. Glenview Capital has reportedly built a sizable position in CVS Health, signalling renewed investor interest in turning around the company’s fortunes amid competitive pressures in the healthcare sector.
  • Crypto Stocks Slide as Bitcoin Retreats: Stocks linked to the cryptocurrency market declined on Monday, as Bitcoin fell 3%, trading below $64,000. Coinbase shares dropped 7%, while MicroStrategy fell 4%, reflecting the broader retreat in digital assets after last week’s sizable rally. 
  • EchoStar Declines on DirecTV Deal: EchoStar shares tumbled 11% after DirecTV agreed to purchase its satellite television business, including Dish TV. The deal brings an end to years of on-and-off discussions between the two distributors. 
  • Moderna Rises on Norovirus Vaccine News: Moderna shares edged up more than 1% on Monday after the biotech company announced that it had administered the first dose in its phase three trial of a prospective norovirus vaccine. Investors are closely watching Moderna’s expanding pipeline as it seeks to diversify beyond its COVID-19 vaccine portfolio.

As September draws to a close major indices finished on a strong note, with the S&P 500 and Dow Jones both posting record highs, while the Nasdaq gained ground despite volatility spurred by Federal Reserve Chair Jerome Powell’s comments on future rate cuts. The Dow added 17.15 points, the S&P 500 rose 0.42%, and the Nasdaq gained 0.38%, all capping a positive month and quarter. European markets, however, struggled, with the Stoxx 600 closing 0.95% lower amid losses in the auto sector, while China’s CSI 300 surged over 8% on the back of a stimulus rally. Oil prices edged higher, and gold consolidated just below its recent highs, maintaining an overall uptrend. With key labour data expected later this week, investors are watching closely for insights that could shape the market’s direction in the final quarter of the year.