Stocks traded mixed on Monday, with tech names struggling ahead of a crucial week dominated by expectations for the Federal Reserve’s first interest rate cut in four years.
The tech-heavy Nasdaq Composite (^IXIC) fell 1%. The S&P 500 (^GSPC) lost 0.3%, while the Dow Jones Industrial Average (^DJI) rose 0.3%, after strong weekly wins for the major stock gauges.
Techs are under pressure as Apple (AAPL) shares lose ground amid concerns about iPhone 16 sales. The megacap’s stock is down over 3% following analysts’ findings that early demand for the recently updated smartphone is lagging 2023 levels.
More broadly, stocks are diverging amid rising bets that the Fed will opt for a more drastic 50 basis point cut in its monetary policy decision on Wednesday at the end of its two-day meeting.
The central bank is almost universally expected to bring in the first US rate cut in four years — a significant policy shift and an official end to a years-long tightening campaign designed to tamp down inflation.
Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut
That conviction has put investors on edge over how aggressively the Fed will lower rates, whether by 0.5% or 0.25%. A half-point move would aim to protect the labor market and reduce the risk of recession but would also risk spooking investors by signaling a dire economic outlook.
As of Monday, traders are pricing in a 61% chance of an outsized move, compared with 50% a day ago. The odds of a 25 basis point cut stand at 39%, per the CME FedWatch tool.
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Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Monday:
Apple (AAPL): Shares of the tech giant slid more than 2% in morning trading Monday following a burst of analyst reports that suggested early demand for Cupertino’s latest smartphone, iPhone 16, is lagging behind the release of last year’s model around the same time period.
Intel (INTC): Shares of the technology company rose Monday morning following a Bloomberg report that the chip giant will receive up to $3.5 billion in funding to make chips for the Defense Department. This would be in addition to the billions the company was awarded under the Chips and Science Act.
Trump Media & Technology Group (DJT, DJTWW): Shares of Trump’s media company moved lower during morning trading after reports of a second assassination attempt on former President Donald Trump’s life. The Republican presidential candidate confirmed he is “safe” in a campaign email. The FBI is conducting an investigation while the suspected gunman is now in custody.
Bausch + Lomb (BLCO (BLCO): Shares of the eye-care company rose more than 4% following a report that it is considering a sale to disentangle itself from its parent company. The Financial Times reported on Friday that Bausch + Lomb is working with Goldman Sachs to search for potential buyers and gauge interest. Parent company Bausch Health owns the majority of Bausch + Lomb’s shares.
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Zillow stock gains as Wedbush raises price target and rating
Wedbush has adjusted its outlook on Zillow (Z), increasing the price target to $80 from the previous $50, and upgrading its rating on the stock to Outperform from Neutral.
Shares were up more than 3% Monday morning.
The analyst Jay McCanless in a research note attributed his increased confidence to lower mortgage rates providing a “positive catalyst” for Zillow’s core brokerage business.
Mortgage rates have slid in recent months, hitting their lowest level in over a year as investors anticipate rate cuts from the Fed this month. The central bank will issue its next policy decision on Wednesday.
And there’s also potential for further declines as the Fed prepares to start a new cycle of interest rate cuts this week, which could continue into next year. Lower borrowing costs would help with affordability.
Additionally, according to McCanless, the company’s software and services offerings, a segment of Zillow’s residential division, “have enabled total revenue to grow at a pace surpassing the national existing home market for several quarters.”
McCanless raised his fiscal 2025 revenue growth forecast for the residential segment to 17% from 12.5% and doubled his rental revenue growth estimate to 10% from 5%, citing new apartment construction.
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Fed to enter new era with first rate cut in 4 years Wednesday. What comes next?
When the Federal Reserve meets Wednesday, officials are expected to mark the end of an era as they cut interest rates for the first time in four years and chart a course for lower rates over the next two years, reports Yahoo Finance’s Jennifer Schonberger.
“This is a big meeting,” said former Kansas City Fed president Esther George. “It’s one that’s been foreshadowed since late last year. It’s long been expected.”
The central bank is expected to lower rates by a quarter percentage point to a new range of 5.0%-5.25% from its 23-year high of 5.25% to 5.5% on Wednesday when their policy meeting concludes. The actions will officially mark the termination of the most aggressive inflation-fighting campaign since the 1980s.
Investors’ bets on how deeply the Fed will cut rates for the first time have been fluctuating widely. As of Monday morning, traders were pricing in a 61% chance of a reduction of 50 basis points, versus 39% for 25 basis points. The odds were split 50-50 on Friday, compared with an 85% backing for the smaller cut a week or so ago.
The rate cut will mark the first in a series of cuts, as the central bank’s new era of easy money is expected to last through 2025 and 2026. That shift will ripple through the US economy by making it cheaper for Americans to borrow what they need to buy houses, cars, and credit card purchases.
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Apple stock falls 2% following reports on early demand for iPhone 16
Apple stock slid more than 2% in morning trading Monday following a burst of analyst reports that suggested early demand for the company’s latest smartphone, iPhone 16, is lagging behind the release of last year’s model around the same time period.
The Street reported findings from Citigroup, Jefferies, and TF International Securities analyst Ming-Chi Kuo that indicated demand for the AI-capable phone is softer than 2023 levels.
Kuo, who has accurately predicted Apple’s moves in the past, estimated the first weekend of preorder sales for the iPhone 16 brought in about 37 million units, down nearly 13% from the equivalent weekend of last year’s iPhone 15 sales debut. “The key factor is the lower-than-expected demand for the iPhone 16 Pro series.” he wrote in a post on Monday.
Earlier this year, Kuo authored a report saying iPhone shipments will decline as much as 15% year over year in 2024, owing to a drop in iPhone sales in China coupled with the emergence of generative AI-powered and foldable smartphones, which will put pressure on iPhone sales throughout the year.
Meanwhile, Jefferies noted that some iPhone 16 models are available for store pickup almost immediately, suggesting softer consumer interest. And Citi pointed to intensifying competition in China and upgrade fatigue as among the factors explaining the weaker demand.
Apple’s newest iPhone model is a key component in the company’s AI strategy, which centers on bringing powerful and intuitive new use cases to everyday users. Apple touts its AI platform, Apple Intelligence, as one of the main selling points for its latest phones, as its software will only run on last year’s iPhone 15 Pro or newer models.
Analysts are banking on that upgrade incentive to reinvigorate iPhone sales and push the stock’s value higher.
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Stocks open mixed as Wall Street anticipates major rate cut
Stocks traded mixed on Monday, with tech names struggling ahead of a crucial week dominated by expectations for the Federal Reserve’s first interest rate cut in four years.
The tech-heavy Nasdaq Composite (^IXIC) fell roughly 0.7%. The Dow Jones Industrial Average (^DJI) rose 0.5%, while the S&P 500 (^GSPC) was little changed after strong weekly wins for the major stock gauges.
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