US markets extended their gains on Monday, with the S&P 500 reaching a new record close as traders built on the optimism from last week’s Federal Reserve interest rate cut. The Dow Jones Industrial Average also hit a fresh high, while the Nasdaq inched up, driven by strength in tech stocks. Despite some concerns over weaker economic data, such as the recent drop in manufacturing activity, investors remain focused on the positive impact of the Fed’s first rate cut in four years. With a key labour market report on the horizon, traders are cautiously optimistic about the market’s direction.

Key Takeaways:

  • S&P 500 Hits Record Close: The S&P 500 advanced 0.28%, closing at an all-time high of 5,718.57. Traders extended the rally driven by last week’s Federal Reserve interest rate cut, marking a continuation of positive momentum as investors remain optimistic about future economic policy.
  • Dow Climbs Above 42,000: The Dow Jones Industrial Average gained 61.29 points, or 0.15%, to close at a new record of 42,124.65. This follows Friday’s notable finish above 42,000, marking a second straight day of gains as investors digest the Federal Reserve’s first rate cut in four years.
  • Nasdaq Composite Edges Higher: The Nasdaq Composite ticked up by 0.14%, finishing at 17,974.27. Despite some choppiness in tech stocks earlier in the session, continued strength in the sector, including rising optimism around AI-related stocks, helped push the index higher.
  • European Markets Post Gains Despite PMI Weakness: The pan-European Stoxx 600 index ended 0.4% higher, with autos stocks leading the charge with a 1.9% gain. The FTSE 100 climbed 0.36% to close at 8,259.71, while France’s CAC 40 gained 0.1% to close at 7,508. However, disappointing French and German PMI data—both registering in contraction territory—raised concerns about the region’s economic outlook. France’s PMI slumped to 47.4, while Germany’s dropped to 47.2, both of which are multi-month lows.
  • Asian Markets Mixed After Fed Cut: Asia-Pacific markets saw mixed results as investors digested the US Federal Reserve’s rate cut and regional central bank policy decisions. The Reserve Bank of Australia (RBA) is holding its two-day meeting, where it is expected to keep rates steady at 4.35%. Meanwhile, Japan’s Nikkei futures traded at 38,375 in Chicago, up from Friday’s close of 37,723.91. Singapore’s inflation data came in higher than expected, with headline CPI rising 2.2% year-over-year and core CPI at 2.7%, sparking concerns about future monetary policy tightening. China’s youth unemployment continued to rise, adding pressure on the government to stimulate the economy despite the People’s Bank of China keeping key benchmark rates unchanged.
  • Manufacturing PMI Hits 15-Month Low: US manufacturing PMI fell to 47.0 in September, its lowest level in 15 months, down from 47.9 in August. This signals continued contraction in the manufacturing sector and adds to concerns that the US economy may not achieve a soft landing.
  • Treasury Yields Edge Higher: The 10-year US Treasury yield rose slightly to 3.736%, while the 2-year yield held steady at 3.587%. Both yields reflect the cautious optimism in the markets following the Federal Reserve’s decision to cut interest rates by 50 basis points, with investors continuing to assess the longer-term impact on growth.
  • Oil Prices Fall on Euro Zone Concerns: Brent crude futures fell 0.8%, closing at $73.90 per barrel, while US crude futures slid 0.9% to settle at $70.37. Weak euro zone business activity, particularly in Germany and France, added to worries about future energy demand, driving prices lower.

FX Today:

  • EUR/USD Retreats as Resistance Holds Firm: The EUR/USD pair traded around 1.1115 on Monday, retreating slightly after testing resistance at 1.1125. The pair remains supported by the 50-period Simple Moving Average (SMA) at 1.1109, while the broader uptrend persists. A break above the key resistance level at 1.1125 could push the pair toward 1.1200, a psychological barrier that traders are watching closely. On the downside, if EUR/USD falls below the 50-period SMA, it could test the 100-period SMA at 1.1086 or even the 200-period SMA at 1.1067, which would act as critical support levels in the event of further pullback.
  • GBP/USD Pushes Higher, Eyes Further Gains: GBP/USD climbed to 1.3344 on Monday, extending its rally after breaking the key 1.3300 level. The pair continues to be well supported by the 50-period SMA at 1.3199, with additional support from the 100-period SMA at 1.3162 and the 200-period SMA at 1.3071. The bullish momentum remains strong, with traders eyeing the next resistance level at 1.3400. If the pair experiences a pullback, the 1.3300 level will provide immediate support, while a break below could see GBP/USD testing the 50-period SMA at 1.3199.
  • AUD/USD Approaches Resistance as Dollar Weakens: AUD/USD rose to 0.6844 on Monday, benefiting from weaker US data and risk-on sentiment. The pair found strong support at the 50-period SMA at 0.6758 and is now approaching key resistance at 0.6850. A breakout above this level could pave the way for further gains, potentially targeting the 0.6900 level. However, if the pair fails to clear the 0.6850 resistance, a pullback toward the 50-period SMA at 0.6758 is likely, with the 100-period SMA at 0.6736 providing additional support.
  • USD/JPY Drops Below 144.00 on Weak US Data: USD/JPY slipped on Monday, falling below the 144.00 level as softer-than-expected US economic data fuelled speculation of potential Federal Reserve rate cuts. The pair dropped to 143.45, after briefly hitting a high of 144.46 earlier in the session. USD/JPY faced resistance at 144.00, with technical indicators signalling further downside. Immediate support lies near 142.92, followed by the next key level at 142.03. If selling pressure continues, the pair could revisit its September low of 139.58. On the upside, a break above 144.00 could see the pair testing the recent high of 144.49, although the outlook remains bearish amid growing economic uncertainty.
  • Gold Surges to Record High Amid Fed Cut Bets: Gold prices soared on Monday, closing at $2,627 per ounce, marking a new all-time high. The precious metal saw a 0.20% gain as traders bet on further Federal Reserve rate cuts following weaker-than-expected US data. Gold briefly tested resistance at $2,628 and remains in a strong uptrend. The 50-period SMA at $2,578.14 provides solid support, while the 100-period SMA at $2,540.58 and the 200-period SMA at $2,510.78 reinforce the bullish trend. If gold breaks above the $2,628 resistance level, further gains could push it toward $2,640, with downside support expected at $2,578.14 in case of a pullback.

Market Movers:

  • Tesla Climbs on Delivery Optimism: Tesla shares surged 4.9% on Monday after Barclays reiterated its positive outlook, citing potential upside in the company’s third-quarter delivery numbers. Traders remain optimistic that Tesla could exceed expectations, bolstered by its strong performance in the electric vehicle market.
  • Micron Technology Rises Ahead of Earnings: Micron Technology gained 2.9% as investors positioned themselves ahead of the company’s earnings report expected on Wednesday. Analysts at JPMorgan reiterated their overweight rating, driven by strong demand in artificial intelligence and server segments, which could boost the company’s performance in the coming quarter.
  • AeroVironment Pops After US Army Contract Update: AeroVironment jumped 11.9% after the US Army lifted a stop-work order on a $990 million contract, fuelling investor optimism about the company’s defence-related revenues. This marks the stock’s largest advance since August, when it gained 9% following another positive contract update.
  • Biohaven Soars on Positive Trial Data: Shares of Biohaven surged 13.7% after the company released promising trial data for its drug, troriluzole, which treats spinocerebellar ataxia. The study showed that the drug slowed the disease’s progression by 50% to 70%, prompting significant investor interest in the stock and its future potential.
  • Intel Gains on Takeover Talks: Intel climbed 3.3% following reports that Apollo Global Management had proposed a multibillion-dollar investment in the company. Additionally, Qualcomm was said to have recently approached Intel with a takeover proposal, further boosting market sentiment.
  • General Motors Declines: General Motors dropped 1.7% after downgraded the stock from outperform to market perform, citing potential earnings risks and concerns over pricing pressures due to inventory buildup. The downgrade encouraged a wave of selling in GM shares, dampening the automaker’s recent momentum.
  • Ulta Beauty Falls on Downgrade: Ulta Beauty shares slid 2% after downgraded the stock to hold from buy, noting slowing sales growth and a full valuation. Investors reacted negatively to the report, sending shares lower as concerns over future performance mounted.
  • Ciena Jumps on Double Upgrade: Networking systems provider Ciena rose 5% after Citi upgraded the stock from sell to buy, reflecting increased confidence in the company’s ability to meet long-term growth targets. The double upgrade sent Ciena shares higher as traders responded to the positive outlook.

As the week begins, markets continue to show resilience, with the S&P 500 and Dow Jones closing at record highs, fuelled by optimism surrounding the Federal Reserve’s recent interest rate cut. However, caution remains in the air as investors parse mixed US economic data, including a 15-month low in manufacturing PMI, which could signal underlying weakness. While tech stocks like Tesla helped lift the Nasdaq, traders are keeping a close eye on upcoming labour market reports for further clues on the economy’s trajectory. European markets posted gains despite disappointing PMI data in France and Germany, while Asian markets saw mixed results amid uncertainty surrounding regional central bank policies. With oil prices slipping and gold reaching new highs, all eyes are now on key economic indicators due later in the week to determine the next market direction.