Stock Market Today: Dow futures ease after strongest weekly gain in nine months

Gold futures headed lower on Monday, poised to post a loss after back-to-back session gains and following a rise above $2,500 an ounce last week to reach their highest level on record.

“It is possible that the price may see further retracement, and this is purely because the gold price went too far and too quick last week,” said Naeem Aslam, chief investment offer at Zaye Capital Markets, in market commentary. The price level of $2,500 is “very hot for many traders, and they are not going to feel very comfortable buying gold above this price point under the current circumstances.”

“Risk appetite” is back, with U.S. equity markets having experienced a decent rally last week, he said. Benchmark U.S. stock indexes were also trading higher Friday, drawing some interest away from gold.

Meanwhile, a large number of investors have also already “baked in the possibility of a deeper rate cut” by the Federal Reserve, said Aslam, but if Fed Chairman Jerome Powell does not indicate that possibility, there may be further selloffs for gold.

In Monday dealings, December gold was down $5.50, or 0.2%, at $2,532.30 an ounce on Comex after touching an intraday record high of $2,538.70 on Friday.

Icahn Enterprises LP’s stock slid 5.7% early Monday after the Securities and Exchange Commission announced charges against Carl Icahn and his investment arm for failing to make the required disclosures relating to personal margin loans worth billions of dollars.

IEP has agreed to pay $1.5 million, and Icahn himself has agreed to pay $500,000 in civil penalties to settle the charges, the SEC said in a statement.

The regulator found that from at least Dec. 31, 2018, through the present day, Icahn pledged about 51% to 82% of IEP’s outstanding securities as collateral for billions of personal margin loans from various lenders.

The benchmark 10-year Treasury yield was trading on Monday at the lower end of a 3.8%-4% range which BMO Capital Markets strategists say may persist until Friday’s Jackson Hole speech by Federal Reserve Chairman Jerome Powell.

Treasury yields have “convincingly” settled into a lower range as the Fed “has become convinced that progress on the inflation front will continue,” strategists Ian Lyngen and Vail Hartman wrote in a note. “Our expectations are for Powell to more clearly signal that we’ll see a September cut and offer greater context for what the Fed envisions for the pace of forward rate reductions.”

U.S. stocks opened flat to slightly higher Monday, with investors looking for follow-through after the best week of 2024. Activity may remain subdued ahead of Friday’s speech by Federal Reserve Chair Jerome Powell at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. Minutes of the Fed’s July policy meeting are due Wednesday.

“After the S&P 500’s biggest nine-day rally in nearly two years, traders will be wondering whether bulls can maintain the momentum. With little high-profile economic data in this week’s pipeline, earnings and the Fed may drive the discussion,” said Chris Larkin, managing director for investing and trading at E-Trade from Morgan Stanley.

“With markets banking on a 0.25% rate cut next month, traders will parse the FOMC minutes and comments coming out of the Jackson Hole economic confab for any insights into the Fed’s longer-term outlook,” he said.

The S&P 500’s top five stocks climbed to a new peak in July in terms of their outsized value relative to the rest of the index.

“Concentration within the US equity market is currently abnormally high,” Michael Hartnett’s BofA Global research team wrote in a recent research note.

The combined value of Microsoft Corp., Apple Inc., Nvidia Corp., Alphabet Inc. and Amazon.com Inc. hit at all-time high of 29% in terms of market capitalization July 2024.

During the Technology, Media, Telecom (TMT) bubble in 2000, the top five largest tech stocks represented only 18% of the index, according to the team.

U.S. stocks staged a dramatic recovery last week, but the market’s game of ping-pong likely isn’t over yet, according to a private wealth advisor with UBS Private Wealth Management.

Although economic data released last week appeared to soothe investors’ recession fears as stocks saw their strongest returns of the year, the debate about where the U.S. economy is headed next has yet to be settled. As such, another batch of downbeat U.S. economic data could easily spark another selloff.

“While we do remain generally bullish, we don’t see a straight line up in the market, as the economy is slowing and there will likely be a mix of conflicting economic data points over the coming months, which is set to continue this recessionary debate,” said Greg Marcus, a managing director and private wealth advisor at UBS.

With this in mind, Marcus recommended that investors keep some “dry powder” handy to take advantage of any pullbacks. For those with substantial allocations to cash, it might make sense to start shifting more of this money into bonds to take advantage of higher yields before the Federal Reserve starts cutting interest rates.

Futures traders see a rate cut in September as virtually guaranteed, according to data from the CME Group.

Instead of focusing on the technology stocks that have led the market higher for much of the past 18 months, investors should consider spreading their equity allocation to a broader universe of stocks. Marcus highlighted small caps and value stocks as two categories that could perform well once the Fed cuts rates.

Deutsche Bank strategist Henry Allen also warned on Monday that many of the catalysts that drove stocks lower earlier this month remain in place. Valuations remain stretched relative to history, and investor positioning is modestly overweight.

Kneejerk calls for an emergency intermeeting rate cut that followed the July jobs report have faded away, but speculation over the size of the Federal Reserve’s September move remain. Fed-funds futures traders still see a 26.5% probability of a half-point reduction when policymakers meet this month, albeit down from 50% a week ago.

That all seems odd to Steve Barrow, head of G10 strategy at Standard Bank.

“We don’t doubt that a 50-bps rate cut is an option; perhaps even the best one, but a 50-bps cut at this stage just does not seem to suit the way in which the Fed has acted in the past,” Barrow said in a Monday note. “Even the last tightening cycle, where the Fed lifted rates from 0.25% to 5.5% started with a 25-bps hike” before eventually delivering 50- and 75-basis point increases.

“We expect the Fed to begin with a 25-bps cut in the looming easing cycle but, at the same time, we would not be at all surprised if the Fed were to step up the pace as the cycle unfolds to include 50-bps cuts either from late this year or the early part of 2025,” he said.

GeoVax Labs Inc.’s stock soared 54% early Monday to lead a fresh rally among companies developing treatments for mpox, after rival Siga Technologies Inc. said a trial of its antiviral failed to meet its main goal.

GeoVax’s stock has gained 239% in the month to date, rallying ever since the World Health Organization declared mpox a public health emergency of international concern last Wednesday.

Siga said late Friday a preliminary analysis of data from a trial being conducted in the Democratic Republic of Congo evaluating its antiviral tecovirimat as a treatment for mpox failed to meet its primary endpoint of a statistically significant improvement in time to lesion resolution with 28 days post-randomization.

It’s all eyes on Federal Reserve Chair Jerome Powell this week as he prepares to deliver a speech at the Kansas City Fed’s annual Jackson Hole symposium on Friday. Powell will set the table for a widely expected September rate cut, but don’t expect him to get specific on the size, said Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI.

“We do not expect a hard steer as to whether the first move will be a 25bp (basis points) or 50bp cut, with Powell likely instead to indicate that this will depend on the next set of labor data,” Guha said in a Monday note.

“We think Powell’s take will be reassuring and consistent with a soft baseline of a string of 25s but he will convey the Fed is open to 50s and the bar for this is not very high,” he said.

Advanced Micro Devices was moving after announcing it’s buying ZT Systems for $4.9 billion. Shares in AMD, listed on the Nasdaq, increased 3% in Monday’s pre-market trading session having gained 37% in the previous 12 months.