US stocks closed nearly unchanged on Friday (Sep 20), as investors paused buying after a strong rally in the prior session that was fueled by an upsized interest rate cut by the Federal Reserve, while Nike’s gains helped nudge the Dow to a record.
After notching their biggest daily percentage gains since mid-August, major averages were subdued for most of the session, but managed to secure weekly gains of at least 1 per cent.
Stocks briefly had pared losses after comments from Fed Governor Christopher Waller increased expectations the central bank will cut interest rates by 50 basis points (bps) at its November meeting, having just cut by 50 bps on Wednesday.
Fellow governor Michelle Bowman, however, maintained that a smaller Fed cut this week would have been preferred.
“The market is still trying to recalibrate because, yes, there were some market participants that may have expected 50 bps but a lot of people didn’t,” said Sid Vaidya, US chief wealth strategist at TD Wealth in New York.
“You have to be a little bit more selective and measured just because we are expecting growth to slow down a little bit and valuations, especially in large-cap growth, are a bit stretched so you want to be a bit selective.”
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The Dow Jones Industrial Average rose 38.17 points or 0.1 per cent to 42,063.36, the S&P 500 lost 11.09 points or 0.2 per cent to 5,702.55 and the Nasdaq Composite lost 65.66 points or 0.4 per cent to 17,948.32.
For the week, the S&P 500 gained 1.4 per cent, the Nasdaq rose 1.5 per cent, and the Dow climbed 1.6 per cent.
Markets are fully pricing in a cut of at least 25 bps in November, with expectations for a cut of 50 bps given a 48.9 per cent chance, according to CME’s FedWatch Tool.
Utilities surged 2.7 per cent to a record high as the best-performing of the 11 major S&P sectors, led by a 22.3 per cent jump in Constellation Energy shares after the company signed a data-center deal with Microsoft to help resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania.
Also supporting the Dow was Intel, whose shares closed up 3.3 per cent after the Wall Street Journal reported Qualcomm had made a takeover approach to the chipmaker.
The Fed began its monetary-easing cycle on Wednesday and projected a period of steady economic growth and low unemployment and inflation.
FedEx plunged 15.2 per cent after lowering its full-year revenue forecast, sending the Dow Jones Transport index down 3.5 per cent, its biggest daily drop since late April 2023.
Nike jumped 6.8 per cent after saying former senior executive Elliott Hill will rejoin the company to succeed John Donahoe as CEO.
Options and futures linked to stock indexes and individual stocks were set to expire simultaneously on Friday in an event known as “triple witching”, and helped lead to the heaviest trading-volume day of the year.
Historically, equities have performed well in a rate-cutting environment. However, the outlook appears bleak with the S&P 500‘s valuations high above its long-term average.
Declining issues outnumbered advancers by a 1.66-to-1 ratio on the NYSE and by a 1.87-to-1 ratio on the Nasdaq.
The S&P 500 posted 32 new 52-week highs and one new low while the Nasdaq Composite recorded 114 new highs and 105 new lows.
Volume on US exchanges was 20 billion shares, compared with the 11.5-billion average for the full session over the last 20 trading days. REUTERS
