Stock market: Dow sets record as Wall Street prepares to cut interest rates

NEW YORK — The Dow Jones Industrial Average set a record after quiet trading on Monday as Wall Street prepared for its most anticipated Federal Reserve meeting in years.

The Dow Jones Industrial Average rose 228 points, or 0.6%, surpassing its previous all-time high set a few weeks ago.The much more comprehensive and widely followed Wall Street index, the P500, rose 0.1%, to within 0.6% of its record high set in July.

The Nasdaq Composite Index fell 0.5% as big technology companies and other market stars gave back some of their big gains from recent years.

Most stocks rose on Wall Street, with Oracle’s 5.1% gain helping lead the market. The software company continued a strong run that began last week with a better-than-expected earnings report.

Alcoa also rose 6.1% after announcing it would sell its stake in a Saudi joint venture, Saudi Arabian Mining Co., for $950 million in stock and $150 million in cash. However, declines in some influential Big Tech stocks kept the indexes in check, including a 2.8% drop for Apple and a 1.9% drop for Nvidia. These are among the most influential stocks in the market because they are among the largest by market value.

Stocks have taken a bumpy, terrifying path toward their records, after worries about the U.S. economy and other problems in global markets briefly sent S&P 500 is down nearly 10% from its all-time high last month, SThe P500 is just one day away from getting excited about upcoming interest rate cuts again.

Treasury yields fell in the bond market ahead of Wednesday’s Federal Reserve meeting, where it is expected to cut its key interest rate for the first time in more than four years.

The only question is how much relief the Fed will provide for the economy. Traders are shifting more bets toward a larger-than-usual move of half a percentage point, according to CME Group data. They predict a 63% chance the Fed will exceed its traditional quarter-point cut. That’s up from 50% on Friday and just 30% a week ago.

The difference between a half-point cut and a quarter-point cut may sound academic, but it can have far-reaching effects. Lowering rates reduces pressure on the economy, but it can also give inflation more fuel.

The Federal Reserve is keeping its key interest rate at its highest level in two decades, hoping to slow the economy enough to tame high inflation. With inflation down significantly from its peak two years ago, the Fed has said it can focus more on shoring up the slowing job market and economy. Some critics say it may be acting too late, raising the risk of a possible recession.

A half-percentage-point Fed rate cut would likely be the best bet for stocks in the very near term, according to Michael Wilson and other strategists at Morgan Stanley. But that’s only if the Fed can convince investors it’s not being forced to cut more than usual because of recession fears, among other factors.

The more important thing over the next three to six months, Wilson said, will be how well the labor market holds up. If hiring weakens, stocks could fall whether the Fed cuts rates by a half or a quarter of a percentage point on Wednesday.

In the bond market, the yield on the 10-year Treasury note fell to 3.62% from 3.66% on Friday evening. The two-year yield, which tracks more closely with the Fed, fell to 3.56% from 3.59%.

That came despite a morning report showing that manufacturing in New York state had returned to growth. That surprised economists who had been expecting another month of recession in an area of ​​the economy that has been hit hard by high interest rates.

On Wall Street, shares of Carl Icahn Enterprises rose 14.5% after the company said a U.S. judge dismissed a proposed class action lawsuit against the company. The lawsuit was based on accusations by a research firm that it looks for financial irregularities in companies and seeks to profit from falling stock prices.

Fertilizer maker Mosaic fell 3.6% after it said electrical equipment failures at its mines and Hurricane Francine would reduce potash and phosphate production in the current quarter.

In conclusion, SThe &P 500 Index rose 7.07 points to 5633.09. The Dow Jones Industrial Average rose 228.30 points to 41622.08 and the Nasdaq Composite fell 91.85 points to 17592.13.

Overseas stocks were mixed amid mostly muted moves in Europe and Asia. Hong Kong’s Hang Seng rose 0.3% after data released over the weekend showed China’s economy slowed further in August.

Markets in Japan, mainland China and South Korea were closed for holidays.
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AP writers Matt Ott and Zimo Zhong contributed to this report.