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Stock Market News for Jun 25, 2024

U.S. stock markets closed mixed on Monday to start the last trading week of a successful June. The mixed outcome was primarily due to sector rotations on the part of market participants from growth-oriented technology to cyclical energy, utilities and financial sectors. Moreover, investors remained concerned regarding the Fed’s interest rate cut policy. The Dow jumped and the Nasdaq Composite slid. The S&P 500 also ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) was up 0.7% or 260.88 points to close at 39.411.21. The blue-chip index posted a 1-month closing high. Notably, 22 components of the 30-stock index ended in positive territory while 8 in negative zone. The tech-heavy Nasdaq Composite finished at 17,496.82, declining 1.1% or 192.54 points due to weak performance by U.S. technology behemoths.

The S&P 500 fell 0.3% to finish at 5,447,87. Nine out of the 11 broad sectors of the broad-market index ended in positive territory, while two in positive zone. The Energy Select Sector SPDR (XLE), the Utilities Select Sector SPDR (XLU), Consumer Staples Select Sector SPDR (XLP) and the Financials Select Sector SPDR (XLF) gained 2.5%, 1.3%, 1.1% and 1%, respectively. On the other hand, the Technology Select Sector SPDR (XLK) tumbled 2.5%.

The fear-gauge CBOE Volatility Index (VIX) was up 1% to 13.33. A total of 10.94 billion shares were traded on Monday, lower than the last 20-session average of 11.92 billion. The NYSE recorded 179 new highs and 48 new lows. The Nasdaq Composite registered 49 new highs and 128 new lows.

Sector Rotations

Wall Street has been witnessing a strong bull run in the last 18 months, predominantly driven by technology stocks. The ongoing tech rally since the beginning of 2023 was led by a massive thrust toward artificial intelligence (AI), especially generative AI. The rapid penetration of digital technologies and the Internet worldwide during the lockdown period, ushered in significant adoption of AI.

At the same time, a resilient U.S. economy, dwindling inflation rate, solid earnings results and the Fed’s indication of at least one rate cut of 25 basis points this year and a full 1% cut in the benchmark interest rate in 2025, lifted stock prices of several stocks from the growth-oriented sectors like technology and consumer discretionary. A few technology stocks have skyrocketed year to date providing more than 100% returns.

A large section of investors is now concerned regarding the continuation of these stock price momentum. Consequently, sector churn took place from overvalued technology and consumer discretionary sector to more cyclical energy, utilities, financials, industrials and materials sector.

Share of technology behemoths like NVIDIA Corp. NVDA, Dell Technologies Inc. DELL and Super Micro Computer Inc. SMCI plummeted 6.7%, 5.2% and 8.7%, respectively. On the other hand, shares of investment banking giant The Goldman Sachs Group Inc. GS, and oil behemoths Chevron Corp. CVX and Exxon Mobil Corp. XOM surged 2.7%, 2.6% and 3%, respectively.

NVIDIA and Dell Technologies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rate Cut Concerns

Market participants remained concerned regarding the Fed’s interest rate cut decisions and the magnitudes of the reduction this year. San Francisco Federal Reserve President Mary Daly said that the central bank needs to do more before reducing the benchmark lending rate from its existing range of 5.25-5.5%. This is the highest level in 23 years.

Daly said, “We’ve made a lot of progress, but there is still work to do. Monetary policy is working, but we need to finish the job.” According to Daly, “There are multiple scenarios left to play out, with each in the realm of reasonable. We need to be ready to respond to however the economy evolves.”

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