By Chuck Mikolajczak
NEW YORK (Reuters) -The Nasdaq closed at a record high on Monday and the S&P 500 also rose as investors gauged the latest economic data while looking toward the Federal Reserve's final policy announcement of the year later in the week to gauge the path of interest rates.
Markets have almost completely priced in a rate cut at the conclusion of the Fed's two-day policy meeting on Wednesday, with a 95.4% chance for a cut of 25 basis points (bps), according to CME's FedWatch Tool.
"Maybe the market was a bit oversold last week and with almost a 100% likelihood that the Fed will cut on Wednesday, the only outstanding question is what kind of rhetoric, what kind of notes will investors get regarding guidance," said Sam Stovall, chief investment strategist of CFRA Research in New York.
"It is likely to be a hawkish cut, meaning they will cut rates but the Fed will be talking about how they are still data-dependent and as a result there could be fewer cuts next year than people are thinking."
On the economic front, S&P Global (NYSE:SPGI) said its flash manufacturing PMI dropped to 48.3 this month, below the 49.8 reading of economists polled by Reuters and the 49.7 in November. In addition, a gauge of factory production hit its lowest level since May 2020 ahead of the prospect of higher tariffs increasing the cost of imported raw materials next year.
The Dow Jones Industrial Average fell 110.58 points, or 0.25%, to 43,717.48, the S&P 500 gained 22.99 points, or 0.38%, to 6,074.08 and the Nasdaq Composite gained 247.17 points, or 1.24%, to 20,173.89.
The S&P 500 snapped a three-week streak of gains last week and the Dow also fell, while the Nasdaq managed a fourth straight week of gains. The Dow has now declined for eight straight sessions, its longest daily streak of declines since June 2018.
Most megacap and growth stocks gained ground on Monday, with Google parent Alphabet (NASDAQ:GOOGL) rising 3.6% and Tesla (NASDAQ:TSLA) up 6.1% to help lift the communication services and consumer discretionary sectors, the best-performing of the 11 major S&P sectors on the session. Wedbush Securities raised its price target on Tesla to a Wall Street high of $515.
Ahead of the Fed decision, retail sales data will be eyed on Tuesday for signs of continued strength in the consumer.
The S&P 500 has rallied more than 27% this year as optimism over growth in artificial intelligence-related companies, the start of the Fed's rate-cutting cycle, a resilient economy and expected pro-business policies from Donald Trump's incoming administration have helped boost equities. The benchmark index is up 58.2% over the past two years, which would mark its strongest two-year period since a 65.9% surge in 1997 and 1998.
Honeywell International (NASDAQ:HON) climbed 3.7% after the industrial conglomerate said it was exploring a separation of its aerospace business.
Declining issues outnumbered advancers by a 1.27-to-1 ratio on the NYSE while advancers outnumbered decliners by a 1.05-to-1 ratio on the Nasdaq.
The S&P 500 posted 14 new 52-week highs and 18 new lows, while the Nasdaq Composite recorded 112 new highs and 193 new lows.
Volume on U.S. exchanges was 15.33 billion shares, compared with the 14.04 billion average for the full session over the last 20 trading days.