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NEW YORK: The Nasdaq closed at a record high on Monday while the S&P 500 gained slightly as technology stocks advanced ahead of Nvidia's highly anticipated earnings and investors gauged the timing of an interest rate cut by the Federal Reserve.
The S&P 500 technology index led gains among the 11 major S&P sectors, rising 1.32%, helped by chipmakers such as Nvidia, which advanced 2.49% ahead of its quarterly results on Wednesday.
Investors will look for evidence in Nvidia's earnings that the AI chip leader can maintain its explosive growth and stay ahead of rivals.
At least three brokerages lifted their Nvidia price targets, while peer Micron Technology climbed 2.96% after Morgan Stanley upgraded the memory chipmaker to "equal-weight" from "underweight." The PHLX semiconductor index rose 2.15%.
"If they surprise to the upside Nvidia could spark a mini fury, although everything's kind of expensive, so it's hard to see a big move up about it," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
"If the Fed starts to lower rates, that would really spark a rally but it doesn't seem like the data supports that yet."
The Dow Jones Industrial Average fell 196.82 points, or 0.49%, to 39,806.77. The S&P 500 gained 4.86 points, or 0.09%, at 5,308.13 and the Nasdaq Composite rose 108.91 points, or 0.65%, to 16,794.87.
The Dow was weighed down by a 4.5% drop in JPMorgan shares after CEO Jamie Dimon said he was "cautiously pessimistic" and said the company would not buy back its stock at current prices.
A solid earnings season and signs inflation may be starting to cool again have reignited hopes for Fed rate cuts this year, pushing major averages to record levels. The blue-chip Dow closed above 40,000 points for the first time last week.
Comments from Fed officials
on Monday did little to alter expectations for cuts by the central bank, as they were reluctant to say inflation pressures were easing and several stressed the need for caution.
Minutes of the Fed's latest monetary policy meeting are scheduled to be released on Wednesday. Markets are pricing in a 63.3% chance for a cut of at least 25 basis points (bps) at the September meeting, the CME's
FedWatch Tool showed.
The recent rally has started to raise concerns about stock valuations, with the S&P 500 trading at a forward price-to-earning ratio of 20.8, well above its historic average of 15.9, according to LSEG data.
Deutsche Bank raised its 2024 year-end S&P 500 target to 5,500 from 5,100 points, the highest among major brokerages, while Morgan Stanley forecast it would hit 5,400 by June 2025.
Norwegian Cruise Line surged 7.56% after lifting its annual profit forecast.
Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.01-to-1 ratio.
The S&P 500 posted 58 new 52-week highs and four new lows while the Nasdaq recorded 222 new highs and 101 new lows.
Volume on U.S. exchanges was 12.31 billion shares, compared with the 11.82 billion average for the full session over the last 20 trading days.
(Reporting by Chuck Mikolajczak; Editing by Richard Chang)