The sun rises behind the Manhattan skyline and One World Trade Center as people walk along the Hudson River on September 14, 2024, in Jersey City, New Jersey.
Gary Hershorn Corbis News | Getty Images
This report is from today’s CNBC Daily Open, our international market newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. As you see? You can subscribe here.
What you need to know today
Record close for the Dow
At S&P 500 and Dow Jones Industrial Average rose on Monday, with the Dow notching a record close. But the Nasdaq Composite fall. Asia-Pacific shares were mixed. Japan’s Nikkei 225 fell 1.03% as the Japanese yen rose to 140.54 against the US dollar. Hong Kong’s Hang Seng index rose 1.15% as Midea Group shares surged more than 9% in their Hong Kong debut.
The next step for the BOJ
The Bank of Japan will not raise interest rates at its September meeting, according to a CNBC survey of 32 analysts. However, the outlook for the October and December meetings is less certain. Almost 20% think an October hike is possible, while 25% say the bank’s next hike is in December.
India’s slow deposit growth
The governor of the Reserve Bank of India Shaktikanta Das told CNBC in an exclusive interview that the slow growth in deposits is not a cause for concern now, and said banks “out new products to mobilize deposits.”
Intel forges a new path for foundry
Intel shares rose around 8% in full trading on the news of the chipmaker’s plans to structure the foundry business as an independent unit with its own board and the ability to raise external funding. It may even spin off the business as a public company, according to people familiar with the matter. Separately, the Biden administration on Monday gave Intel up to $3 billion under the CHIPS Act.
(PRO) “Golden age of fixed income”
The US Federal Reserve is poised to cut interest rates this week. Benchmark rates affect the cost of borrowing. This means bond yields will fall as the Fed lowers rates. Rick Rieder, BlackRock’s chief global investment officer of fixed income, thinks now is the time for investors to take advantage of the “golden age of fixed income.”
Bottom line
Tech stocks benefit the most from low interest rates, says conventional market wisdom.
That’s because tech companies tend to promise future profits in exchange for current money. When rates are low, the proposition seems attractive because returns are low elsewhere. But when rates are high, those promises don’t look good because yields are less risky than assets like Treasurys.
The past two years have obliterated this narrative. Tech has soared even as interest rates are at a 23-year high, thanks to enthusiasm over artificial intelligence’s promise of new and explosive revenue streams.
Nvidia, the lynchpin of AI, has soared nearly 136% this year alone. Meta, which has its own AI model called Llama, is up about 51%.
With the market pricing in a 67% probability – up from 30% last week – that the US Federal Reserve will make a 50 basis point cut larger than usual, according to the CME FedWatch Tool, it is likely that technology will emerge. more.
The sector, however, has been rocky in recent weeks. At VanEck Semiconductor ETFFor example, fell 1.31% on Friday, when Nvidia down 1.95%.
Heavy technical Nasdaq Composite down 0.52%, while in S&P 500 inch up 0.13% and on Dow Jones Industrial Average added 0.55% to close at a new record.
This means investors have shifted from technology to other sectors that may experience tailwinds amid lower rates. Case in point: the financial and energy sectors rose more than 1% on Monday, outperforming the broader market.
Goldman Sachs reported the hedge fund’s weekly purchases last week of financial stocks were the highest since June 2023.
“Other areas of the market began to perk up, and many have to do with future rate cuts that come into play,” said Christopher Barto, senior investment analyst at Fort Pitt Capital.
This is not to say that technology is disliked. It is likely to continue to drive the market. But other sectors may appear along for the ride.
– CNBC’s Hakyung Kim, Pia Singh and Yun Li contributed to this story.