Stock futures edged lower on Monday following a record close for the Dow Jones Industrial Average, marking a divergence from the broader market’s performance as technology stocks faced pressure. The Nasdaq Composite and S&P 500 both experienced declines, suggesting a potential shift in investor sentiment from high-flying tech names to other sectors like energy, which saw gains amid rising oil prices. Investors are eagerly awaiting key earnings reports and signals from the Federal Reserve, with speculation mounting over a possible interest rate cut at the upcoming policy meeting. The market is navigating a complex landscape of economic indicators and geopolitical tensions, with all eyes on how these factors will influence future moves.

Key Takeaways:

  • Dow Jones Closes at Record High Despite Market Pullback: The Dow Jones Industrial Average advanced 0.2% to 41,240.5 on Monday, setting a new intraday high before closing at a record. This 30-stock index displayed resilience amid a broader market decline, marking its strength compared to the tech-heavy Nasdaq and the S&P 500.
  • Nasdaq and S&P 500 Decline as Technology Stocks Lag: The Nasdaq Composite fell 0.9% to 17,725.8, while the S&P 500 declined 0.3% to 5,616.8. Technology stocks saw the steepest decline among sectors, indicating a significant pullback from one of the market’s key drivers over the past year. This contrasts sharply with the energy sector, which led the gainers amidst rising oil prices.
  • Federal Reserve Rate Cut Speculation Grows: Following remarks from Federal Reserve Chair Jerome Powell, traders are now widely anticipating a rate cut at the central bank’s September policy meeting. The CME Group’s FedWatch Tool indicates unanimous expectations for at least a 25 basis point reduction, highlighting investor optimism despite ongoing market volatility.
  • European Markets Close Mixed Amid Geopolitical Concerns: European stocks ended the day with mixed results as the pan-European STOXX 600 index was flat at 518.05, still trading around nearly a one-month high. Germany’s DAX fell 0.06%, Italy’s FTSE MIB dropped 0.09%, and Spain’s IBEX 35 edged down 0.03%. France’s CAC 40 defied the trend, gaining 0.23%, possibly benefitting from its diversified market structure. UK markets were closed for a national bank holiday. Adding to the uncertainty, Germany’s Ifo Business Climate Index dropped to 86.6 in August from 87.0 in July, signalling further economic challenges for Europe’s largest economy.
  • Asia-Pacific Markets Respond to Middle East Tensions and Fed Comments: The Asia-Pacific markets were mixed on Monday as Japan’s Nikkei 225 fell 0.66% to 38,110.22, and the Topix index lost 0.87% to close at 2,661.41, as the Japanese yen strengthened 0.42% to 143.5 against the dollar, its strongest level since early August. South Korea’s Kospi dropped 0.14% to end at 2,698.01, and the small-cap Kosdaq slid 0.84% to 766.79, marking its fourth straight day of losses. In contrast, Australia’s S&P/ASX 200 gained 0.76% to finish at 8,084.5, just 30 points away from its all-time high. Hong Kong’s Hang Seng index rose 1.11% in the final hour of trading, while the mainland Chinese CSI 300 index inched down 0.09% to end at 3,324.22. Singapore’s manufacturing output surprised positively, climbing 10.1% month on month in July, a sharp reversal from the 4.3% decline in June, highlighting a bright spot in an otherwise cautious regional market.
  • Oil Prices Surge on Geopolitical Strains and Production Halt: Oil prices climbed significantly, with US West Texas Intermediate futures rising 3.46% to $77.42 per barrel, the highest in two weeks, and Brent crude increasing 3.05% to $81.43 per barrel. The gains were driven by concerns over a production halt in Libya and heightened tensions in the Middle East.
  • Cryptocurrencies Decline as Bitcoin Falls Below $64,000: Major cryptocurrencies faced a downturn, with Bitcoin dropping 1.4% to $63,346 and Ethereum falling 3% to $2,684. The decline in digital assets comes amid broader market uncertainty and shifting investor sentiment.
  • 10-Year Treasury Yield Rises Amid Rate Cut Speculation: The U.S. 10-year Treasury yield increased by 1 basis point to 3.816% on Monday, following Federal Reserve Chair Jerome Powell’s comments suggesting a potential rate cut. The 2-year Treasury yield also rose by 2 basis points to 3.936%. The slight rise in yields reflects market expectations for the Fed’s policy adjustments and ongoing economic uncertainty.

FX Today:

  • USD/JPY Inches Higher on Treasury Yield Gains: The USD/JPY pair saw a modest increase of 0.13% to close at 144.59 as U.S. Treasury yields ticked up. The 10-year yield rose by 1 basis point to 3.816%, and the 2-year yield climbed 2 basis points to 3.936%, reflecting investor expectations for the Federal Reserve’s potential rate cuts. Despite the gains, the pair remains below critical resistance levels, with key levels to watch at 145.00, 146.42, and 147.91. If the pair dips below the 144.00 mark, it could head towards support at 141.69 and further down at 140.00.
  • EUR/USD Retreats After Recent Highs: The EUR/USD pair eased 0.3% to $1.1161 after reaching fresh highs above 1.1200 earlier in the week. The euro faced a mild pullback as the U.S. dollar regained some strength. Immediate resistance is noted at 1.1201, with further barriers at 1.1275. On the downside, the pair may find support at 1.0881, followed by the 200-day SMA at 1.0848 and the weekly low of 1.0777, which could act as a buffer against deeper losses.
  • GBP/USD Hovering Near Yearly High Amid Indecision: The GBP/USD pair hovered around the 1.3200 level, down 0.27%, struggling to maintain the momentum to surpass its new year-to-date high of 1.3230 set last Friday. The pound’s current movement suggests a lack of clear direction, with initial support at 1.3130 and further levels at 1.3100 and 1.3043. Should the pair break above 1.3230, resistance could emerge at 1.3250 and then at the 1.3300 mark.
  • NZD/USD Consolidates as Buyers Step Back: The NZD/USD pair declined by 0.40% to 0.6200, entering a consolidation phase after recent gains. Immediate support is seen at 0.6200 and 0.6150, with a break below potentially leading to a deeper decline towards 0.6100. On the upside, resistance is expected at 0.6255, with a sustained move above this level potentially paving the way for a retest of the 0.6300 zone.
  • Gold Edges Up on Fed Rate Cut Hopes: Gold prices inched higher, trading at $2,516 per troy ounce, up 0.16%, amid growing expectations of a Federal Reserve rate cut following Chair Jerome Powell’s recent comments. The precious metal remains just below its all-time high of $2,531, with further resistance at $2,550 and $2,600. On the downside, a drop below $2,500 could see gold testing support at $2,483 and potentially the 50-day SMA at $2,406.

Market Movers:

  • PDD Holdings Plummets on Revenue Miss: PDD Holdings (PDD) led the Nasdaq 100’s losers, with shares falling over 28% after reporting second-quarter revenue of 97.06 billion yuan, significantly below the consensus estimate of 99.99 billion yuan. The disappointing results raised concerns about the company’s growth prospects, driving a sharp sell-off that reflects investor dissatisfaction with the earnings shortfall.
  • Chip Stocks Under Pressure Amid Broader Market Decline: The technology sector saw significant declines, with chip stocks bearing the brunt. ARM Holdings (ARM), Marvell Technology (MRO), and Broadcom (MRO) all closed down more than 4%, while Advanced Micro Devices (AMD), Micron Technology (MU), Applied Materials (MRO), and Lam Research (LRCX) fell more than 3%. Nvidia (NVDA) and ASML Holding NV (ASML) each lost over 2%, contributing to the sector’s downturn. Intel (INTC) closed down 2%, making it the leading decliner in the Dow Jones Industrial Average.
  • Energy Stocks Rally on Rising Oil Prices: Energy stocks surged on Monday, driven by a more than 3% increase in West Texas Intermediate crude oil prices, which hit a one-week high. Exxon Mobil (XOM) climbed over 2%, while Marathon Oil (MRO), APA Corp (APA), ConocoPhillips (COP), Schlumberger (SLB), Diamondback Energy (FANG), and Devon Energy (DVN) all gained more than 1%. The rise in oil prices was driven by geopolitical tensions in the Middle East and a production halt in Libya, sparking renewed interest in energy stocks.
  • Tesla Drops Amid New Tariff Announcement: Tesla (TSLA) shares fell more than 3% after Canada announced a new 100% tariff on Chinese-made electric vehicles, which includes Teslas manufactured in China. The tariff news added to existing pressures on the stock, reflecting concerns about potential impacts on Tesla’s sales and profitability in the North American market.
  • Guardant Health Slumps on Downgrade: Guardant Health (GH) dropped more than 8% after Nephron Research LLC downgraded the stock from “hold” to “sell” with a price target of $23. The downgrade reflects concerns over the company’s growth outlook and valuation, leading to a sharp sell-off in its shares.
  • Uber Technologies Falls Following Fine: Uber Technologies (UBER) closed down more than 2% after being fined $324 million by the Dutch Data Protection Authority. The fine was imposed for failing to comply with European data protection standards, adding regulatory challenges to the company’s ongoing operational concerns.
  • Kymera Therapeutics Rises on Upgrade: Kymera Therapeutics (KYMR) shares rose more than 3% after Wolfe Research upgraded the stock from “peer perform” to “outperform,” with a new price target of $65. The upgrade reflects optimism about Kymera’s growth prospects and the potential for strong future performance.

As the market navigates an environment filled with geopolitical tensions, fluctuating oil prices, and expectations for Federal Reserve rate cuts, investors remain cautious yet hopeful. The mixed performance across major indices, with the Dow Jones hitting a record high while the Nasdaq and S&P 500 faced declines, underscores the shifting dynamics and sector rotations taking place. With technology stocks under pressure and energy stocks rallying, market participants are closely monitoring earnings reports, economic data, and central bank signals to gauge future directions. Amidst these developments, the upcoming economic releases and geopolitical developments will likely continue to shape investor sentiment and market movements in the days ahead.