U.S. equities advanced sharply on Monday, reversing steep losses from Friday as investor confidence grew around the prospect of an earlier interest rate cut from the Federal Reserve. Gains in major technology firms, buoyed by strong earnings, helped fuel the rally.
By the close of trading at 4:00 p.m. ET, the Dow Jones Industrial Average surged 575 points (1.3%), while the S&P 500 rose 1.5% and the NASDAQ Composite jumped 2%.
Last Friday had seen a sharp sell-off across Wall Street, with the S&P 500 experiencing its worst single-day decline in over two months. The drop came after President Donald Trump signed an executive order introducing significant tariffs on goods from nearly 70 nations.
Sentiment was further dampened by a weak jobs report that included substantial downward revisions to previous months. Trump’s public accusation—without evidence—that the data had been manipulated, followed by his firing of the statistics bureau chief, raised concerns about the credibility of U.S. economic reporting, analysts said.
Sluggish Labor Data Sparks Rate Cut Bets
Monday’s focus turned to factory order figures for June, amid ongoing anxiety about economic momentum. The Labor Department had reported on Friday that only 73,000 nonfarm payrolls were added in July—far short of forecasts for 110,000. On top of that, May and June’s figures were revised downward by a combined 258,000 jobs.
This underwhelming labor data reinforced the belief that the job market is cooling, which led to a surge in expectations for a Fed rate cut in September—now pegged at over 80%.
Despite near-term volatility, Morgan Stanley strategist Mike Wilson reiterated his bullish outlook for U.S. equities, advising clients to see any market weakness as a buying opportunity. In a note, Wilson cited a robust rebound in corporate earnings estimates as a sign that the bear market of 2024 is over, giving way to a new bull cycle that began in April.
While he acknowledged that Friday’s soft labor figures and continued Fed hesitation might result in short-term consolidation, Wilson concluded: “We remain buyers on dips and optimistic over the next 12 months.”
AI-Driven Optimism Fuels Tech Sector Gains
Technology stocks once again took the lead, propelled by optimism surrounding artificial intelligence. Notably, NVIDIA (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Meta Platforms (NASDAQ: META) continued their upward momentum, building on recent earnings beats.
Busy Week Ahead for Corporate Earnings
The focus now turns to a packed earnings calendar. More than 150 firms are due to report this week, spanning tech, industrials, and consumer sectors. So far, the earnings season has exceeded expectations, particularly in companies aligned with AI applications.
Investors are watching for insights from Advanced Micro Devices (NASDAQ: AMD) and Caterpillar (NYSE: CAT) on Tuesday. The following day brings reports from Walt Disney (NYSE: DIS), McDonald’s (NYSE: MCD), and Uber Technologies (NYSE: UBER).
Elsewhere, Berkshire Hathaway (NYSE: BRKb) shares fell after the conglomerate disclosed a $3.76 billion write-down related to its stake in Kraft Heinz (NASDAQ: KHC).
Meanwhile, Tesla (NASDAQ: TSLA) shares advanced after its board approved a massive 96 million-share restricted stock award for CEO Elon Musk, based on recommendations from independent board members.
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