Fed Announces Modest Rate Cut in Latest Move

On Monday, October 21st, local time, the three major U.S. stock indices experienced mixed performances. By the close, the Dow Jones Industrial Average (DJIA) fell by 0.80%, the Nasdaq Composite rose by 0.27%, and the S&P 500 index dipped by 0.18%.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that an unexpected weakening in the labor force would lead to a reconsideration of interest rates, anticipating moderate rate cuts in the coming quarters.

Nvidia's stock price surged by over 4%, reaching a new historical high, with a total market capitalization of $3.53 trillion, approaching Apple's market value.

On Monday, October 21st, local time, the three major U.S. stock indices showed mixed results. By the close, the DJIA had fallen by 344.31 points, or 0.80%, to 42,931.60; the Nasdaq Composite gained 50.46 points, or 0.27%, to 18,540.01; and the S&P 500 index dropped 10.69 points, or 0.18%, to 5,853.98.

After six consecutive weeks of gains, the S&P 500 index experienced a minor decline on Monday, with the real estate sector plummeting by over 2%. Tesla is set to release its quarterly financial report on Wednesday, local time, and its stock closed down by 0.84% on Monday. Nvidia's stock price hit a new historical high, with its latest market capitalization reaching $3.53 trillion, nearing Apple's top market value. Boeing's stock rose by over 3% after reaching a preliminary agreement with a union. Artificial intelligence search company Perplexity has initiated its fourth round of financing for the year, raising $500 million to $1 billion, which is expected to more than double the company's valuation to $8 billion.

Regarding the S&P 500 index's previous six-week rally, Adam Turnquist of LPL Financial noted that such a prolonged increase is relatively rare, having occurred only 53 times since 1950 (about 8% of all six-week cycles). He pointed out, "Although the market has entered a potentially volatile period and faces some resistance near the upper end of the upward channel, history suggests that investors should buy on dips, as momentum tends to continue after six consecutive weeks of gains." Wells Fargo also raised its target range for the S&P 500 index by the end of 2025 from the previous 5,900 to 6,100 points to 6,200 to 6,400 points.

In terms of news, Federal Reserve's Kashkari indicated that an unexpected weakening in the labor force would lead to a reconsideration of interest rates, with expectations of moderate rate cuts in the coming quarters. He stated, "We absolutely want to avoid a recession, and we have seen signs of a weakening labor market, which is why the Federal Reserve cut rates by 50 basis points; looking ahead, we will monitor all data to determine monetary policy; the resilience of the economy makes us question whether the neutral rate is higher; geopolitical risks have not yet had a more significant impact on the oil market, which has always been surprising."

Dallas Fed President Lori Logan once again called for the Federal Reserve to be cautious about rate cuts due to the still uncertain economic environment. Lori Logan said in a written speech to the Securities Industry and Financial Markets Association's annual meeting on Monday, "Reducing restrictive monetary policy will help the Federal Reserve balance the risks in achieving the dual mandate of price stability and maximum employment." Lori Logan stated, "If the economy develops as I currently expect, then gradually lowering the policy rate to a more normal or neutral level will help manage risks and achieve our goals. However, any shock could affect the path to interest rate normalization, including how quickly policy should proceed and where interest rates should stabilize."

In other markets, international oil prices rose. By the close of the day, the November delivery of light crude oil futures on the New York Mercantile Exchange rose by $1.34, to $70.56 per barrel, a gain of 1.94%; the December delivery of Brent crude oil futures rose by $1.23, to $74.29 per barrel, a gain of 1.68%.The US Dollar Index rose. The US Dollar Index, which measures the greenback against six major currencies, gained 0.50% on the day, closing at 104.013 in the foreign exchange market. As of the end of the New York foreign exchange market, 1 euro was exchanged for 1.0812 US dollars, lower than the previous trading day's 1.0865 US dollars; 1 pound was exchanged for 1.2979 US dollars, lower than the previous trading day's 1.3046 US dollars.

NVIDIA closed at another historical high.

In terms of sectors, out of the eleven major sectors of the S&P 500 Index, ten fell and one rose. Among them, the real estate sector led the decline with a drop of 2.08%, and the healthcare sector fell by more than 1%. The information technology sector rose by 0.93%.

Popular tech stocks fluctuated. NVIDIA rose by more than 4%, while Advanced Micro Devices, Super Micro Computer, and Netflix rose by more than 1%. Apple, TSMC, Google A, Intel, Microsoft, Broadcom, and Amazon saw slight increases, while Meta, Cisco, Arm, Oracle, and Tesla saw slight declines. Qualcomm, ASML, Eli Lilly, Texas Instruments, and Micron Technology fell by more than 1%.

Qualcomm fell by 1.12%. On Monday, Qualcomm unveiled a brand new smartphone processor in Hawaii, aimed at providing laptop-level performance for mobile phones and enhancing its support for artificial intelligence (AI) tools. The latest version of the Snapdragon series released this time features Qualcomm's self-designed Oryon processor, which offers a 45% performance increase compared to its predecessor and is more energy-efficient. Qualcomm stated that smartphones based on the new Snapdragon chips will be able to run generative AI software directly on the device, improving response speed and providing users with a faster experience.

Qualcomm holds a dominant position in the Android device market, and its technological updates are crucial for competing with Apple Inc. This shift to proprietary processor design is an important move by Qualcomm CEO Cristiano Amon to promote internal technological investment, aiming to reduce dependence on Arm's designs. The Oryon processor was initially applied to laptop chips and supports Microsoft's AI features, known as "AIPC," which is expected to threaten Intel's dominant position in the personal computer processor market.

NVIDIA rose by 4.14%, with its stock price reaching another historical high, and its total market value exceeded 3.5 trillion US dollars, approaching Apple's position as the market value leader. In the latest report released, Bank of America analysts raised their target price for NVIDIA shares from $165 to $190. This means that the stock could still rise by up to 32% compared to Monday's closing price. Bank of America analysts pointed out that the artificial intelligence market will grow exponentially in the coming years, and they stated that as this chip giant continues to consolidate its leading position in the market, it will bring a "generational opportunity" for NVIDIA. Analysts believe that by 2027, the AI accelerator market will grow to $280 billion. Moreover, over time, it will further grow to over $400 billion, a significant increase from the $45 billion in 2023.

Microsoft rose by 0.15%. Microsoft announced on Monday that it will launch a new feature in November, allowing customers to create autonomous AI agents through CopilotStudio, further promoting its application in the field of artificial intelligence. Unlike traditional chatbots, these autonomous agents require almost no human intervention and can handle tasks such as customer inquiries, identifying sales leads, and managing inventory. The feature does not require complex programming knowledge, and users can simplify daily business processes through this tool.

Microsoft plans to launch ten preset AI agents to help businesses complete tasks ranging from supply chain management to expense tracking and customer communication. As an early testing user, McKinsey & Company has used this tool to create an agent that automatically processes customer inquiries, demonstrating the potential of this technology in enhancing business efficiency. This move aims to provide businesses with more convenient AI solutions and accelerate the commercial application of artificial intelligence.

Google A rose by 0.40%. Honeywell signed a cooperation agreement with Google to combine Google's most advanced artificial intelligence technology, Gemini, with Honeywell's industrial data platform, Forge. Both companies stated on Monday that they aim to provide customers with automated solutions to simplify operations, reduce project cycles, and help address labor shortages in the industrial sector.Through this collaboration, AI tools will automate the tasks of engineers, warehouse workers, and technicians, with the first batch of AI solutions expected to be launched to customers by 2025. Honeywell stated that AI technology will enhance asset utilization, improve employee skills, and increase operational efficiency. This partnership is expected to reduce maintenance costs and boost productivity by processing various types of data, including images, videos, text, and sensor data.

Tesla fell by 0.84%. Tesla is set to release its quarterly financial report on Wednesday local time, providing investors and analysts with an opportunity to inquire about details of Elon Musk's robotaxi plans. Previously, Musk gave a 20-minute presentation on self-driving cars at a highly anticipated event but failed to provide key details, leading to a drop in stock prices and market attention. Investors are eager to learn whether Tesla's core car sales business has improved, especially against a backdrop of weak demand and intensifying competition. Tesla is expected to report a decline in automotive sales profit margins for the third quarter, potentially experiencing its first annual delivery volume drop due to the impact of electric vehicle incentives.

Analysts will also focus on the production timeline and sales strategy for robotaxis, particularly in light of the ongoing investigation by U.S. regulatory authorities into Tesla's autopilot software. Additionally, Tesla's automotive profit margins have become a point of interest, with an expected profit margin of 14.9% for the third quarter, an increase from the previous quarter's 14.6%.