Fed Signals Modest Rate Cuts Ahead
On Monday, October 21st, local time, the three major U.S. stock indices experienced mixed movements. By the close, the Dow Jones Industrial Average (DJIA) fell by 0.80%, the Nasdaq Composite (IXIC) rose by 0.27%, and the S&P 500 index (SPX) declined by 0.18%.
The President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, indicated that an unexpected weakening in the labor force would lead to a reconsideration of interest rates; he anticipates moderate rate cuts in the coming quarters.
Nvidia's stock price surged by over 4%, reaching a new historical high, with a total market capitalization of $3.53 trillion, approaching Apple's market value.
Fed Officials Speak
Moderate Rate Cuts Expected
On Monday, October 21st, local time, the three major U.S. stock indices showed mixed results. By the close, the DJIA fell by 344.31 points, a decrease of 0.80%, to 42,931.60 points; the IXIC gained 50.46 points, an increase of 0.27%, to 18,540.01 points; and the SPX dropped 10.69 points, a decrease of 0.18%, to 5,853.98 points.
After six consecutive weeks of gains, the SPX experienced a slight decline on Monday, with the real estate sector plummeting by over 2%. Tesla is set to release its quarterly financial report on Wednesday, local time, and closed down by 0.84% on Monday. Nvidia's stock price hit a historical high, with its latest market value reaching $3.53 trillion, nearing Apple's top market value position. Boeing's stock rose by over 3% after reaching a preliminary agreement with the union. Artificial intelligence search company Perplexity has initiated its fourth round of financing for the year, raising between $500 million and $1 billion, which is expected to more than double the company's valuation to $8 billion.For the S&P 500 Index's previous six consecutive weeks of gains, Adam Turnquist of LPL Financial stated that such a prolonged rise is relatively rare, having occurred only 53 times since 1950 (approximately 8% of all six-week periods). Wells Fargo also raised its target range for the S&P 500 Index at the end of 2025 from the previous 5,900 to 6,100 points to 6,200 to 6,400 points.
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In terms of news, Federal Reserve's Kashkari indicated that an unexpected weakening in the labor force would lead to a reevaluation of interest rates; he expects moderate rate cuts in the coming quarters. He stated, "We absolutely want to avoid a recession, and we have seen signs of a softening labor market, which is why the Federal Reserve cut rates by 50 basis points; looking ahead, we will pay attention to all data to determine monetary policy; economic resilience makes us question whether the neutral interest rate is higher."
Dallas Fed President Lori Logan once again called for the Federal Reserve to be cautious about rate cuts due to the continued uncertainty in the economic environment. In a written speech to the Securities Industry and Financial Markets Association's annual meeting on Monday, Lori Logan said that reducing restrictive monetary policy would help the Federal Reserve balance the risks in achieving its dual mandate of inflation stability and maximum employment. Lori Logan stated: "If the economy develops as I currently expect, then gradually lowering policy rates to a more normal or neutral level will help manage risks and achieve our goals. However, any shock could affect the path to interest rate normalization, including how quickly policy should proceed and where interest rates should stabilize."
In other market news, international oil prices rose. As of the close of the day, the November delivery of light crude oil futures at the New York Mercantile Exchange rose by $1.34, closing at $70.56 per barrel, up 1.94%; the December delivery of Brent crude oil futures in London rose by $1.23, closing at $74.29 per barrel, up 1.68%.
The US Dollar Index rose. The index, which measures the dollar against six major currencies, rose by 0.50% on the day, closing at 104.013 in the foreign exchange market. As of the end of the New York foreign exchange market, 1 euro was exchanged for $1.0812, lower than the previous trading day's $1.0865; 1 British pound was exchanged for $1.2979, lower than the previous trading day's $1.3046.
Nvidia closed at a new historical high.
In terms of sectors, out of the eleven major sectors of the S&P 500 Index, ten fell and one rose. Among them, the real estate sector led the decline with a drop of 2.08%, and the healthcare sector fell by more than 1%. The information technology sector rose by 0.93%.Popular tech stocks experienced mixed performances. Nvidia rose over 4%, while Advanced Micro Devices, Super Micro Computer, and Netflix rose over 1%. Apple, Google A, Intel, Microsoft, Broadcom, and Amazon saw minor increases. Meta, Cisco, Arm, Oracle, and Tesla experienced minor declines, while Qualcomm, ASML, Eli Lilly, Texas Instruments, and Micron Technology fell over 1%.
Qualcomm fell by 1.12%. On Monday, Qualcomm unveiled a new smartphone processor in Hawaii, aimed at providing laptop-level performance for mobile devices and enhancing support for artificial intelligence (AI) tools. The latest version of the Snapdragon series features Qualcomm's self-designed Oryon processor, which boasts a 45% performance increase over its predecessor and is more energy-efficient. Qualcomm stated that smartphones based on the new Snapdragon chips will be able to run generative AI software directly on the device, improving response times and offering users a faster experience.
Dominant in the Android device market, Qualcomm's technological updates are crucial for competing with Apple Inc. This shift to proprietary processor design is a significant move by Qualcomm CEO Cristiano Amon to drive internal technological investment, aiming to reduce reliance on Arm's designs. Initially used in laptop chips and supporting Microsoft's AI features, known as "AIPC," the Oryon processor is expected to challenge Intel's dominance in the personal computer processor market.
Nvidia rose by 4.14%, with its stock price reaching a new historical high, with a total market value exceeding $3.5 trillion, approaching Apple's position as the market leader. In a recently released report, Bank of America analysts raised their target price for Nvidia shares from $165 to $190. This implies that the stock could rise by up to 32% from Monday's closing price. The analysts pointed out that the AI market will grow exponentially in the coming years, stating that as the chip giant continues to solidify its market-leading position, it will present a "generational opportunity" for Nvidia. They believe that by 2027, the AI accelerator market will grow to $280 billion. Over time, it could further grow to over $400 billion, a significant increase from the $45 billion in 2023.
Microsoft rose by 0.15%. On Monday, Microsoft announced a new feature to be launched in November, allowing customers to create autonomous AI agents through CopilotStudio, further advancing its application in the field of artificial intelligence. Unlike traditional chatbots, these autonomous agents require minimal human intervention and can handle tasks such as customer inquiries, identifying sales leads, and managing inventory. The feature does not require complex programming knowledge, and users can simplify daily business processes through this tool.
Microsoft plans to launch 10 preset AI agents to help businesses with tasks ranging from supply chain management to expense tracking and customer communication. As an early tester, McKinsey & Company has used the tool to create an agent that automatically processes customer inquiries, demonstrating the potential of this technology in enhancing business efficiency. This move aims to provide businesses with more convenient AI solutions and accelerate the commercial application of artificial intelligence.
Google A rose by 0.40%. Honeywell signed a cooperation agreement with Google to combine Google's most advanced AI technology, Gemini, with Honeywell's industrial data platform, Forge. Both companies stated on Monday that they aim to provide customers with automated solutions to simplify operations, reduce project cycles, and help address labor shortages in the industrial sector.
Through this cooperation, AI tools will automate tasks for engineers, warehouse workers, and technicians, with the first batch of AI solutions expected to be launched to customers by 2025. Honeywell stated that AI technology will improve asset utilization, enhance employee skills, and increase operational efficiency. This cooperation is expected to reduce maintenance costs and increase productivity by processing various data types, including images, videos, text, and sensor data.
Tesla fell by 0.84%. Tesla will release its quarterly financial report on Wednesday local time, and investors and analysts will have the opportunity to inquire about Elon Musk's details on the robotaxi plan. Previously, Musk introduced self-driving cars in a highly anticipated 20-minute presentation without providing key details, leading to a drop in stock prices and market attention. Investors are interested in whether Tesla's core car sales business has improved, especially against the backdrop of weak demand and increasing competition. Tesla is expected to report a decline in third-quarter car sales profit margins, affected by electric vehicle incentives, which may result in the first annual delivery volume decline.
Analysts will also focus on the production timeline and sales strategy for robotaxis, especially in the context of U.S. regulatory investigations into Tesla's autopilot software. Additionally, Tesla's car profit margins have become a focus, with an expected third-quarter profit margin of 14.9%, an increase from the previous quarter's 14.6%.
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