By Ankika Biswas and Johann M Cherian
(Reuters) - The Nasdaq and the S&P 500 rose on Monday, buoyed by megacap stocks as investors awaited Big Tech results, a Federal Reserve policy decision and crucial labor numbers this week.
Nvidia (NASDAQ:NVDA), Alphabet (NASDAQ:GOOGL), Amazon.com (O:AMZN) and Meta (NASDAQ:META) Platforms were up between 0.6% and 1.5% following the recent rout in megacap tech shares, which saw the main stock indexes spiral downward last week.
At 9:51 a.m. ET, the Dow Jones Industrial Average was down 140.72 points, or 0.35%, at 40,448.62, the S&P 500 was up 11.18 points, or 0.20%, at 5,470.28, and the Nasdaq Composite was up 116.46 points, or 0.67%, at 17,474.34.
The S&P 500 Consumer Discretionary index led sectoral gains with a 0.9% rise, boosted by a 4.4% jump in Tesla (NASDAQ:TSLA)'s shares after Morgan Stanley (NYSE:MS) added the EV maker's stock to its U.S. autos list as a "top pick".
The three major U.S. stock indexes jumped more than 1% on Friday after hopes of an early start to monetary policy easing were boosted by an encouraging U.S. inflation report, close on the heels of recent data signaling a loosening jobs market.
However, the S&P 500 and the Nasdaq failed to recoup losses and closed the week lower after a disappointing start to tech earnings prompted the indexes to log their steepest one-day slide since 2022 on Wednesday.
The next test for markets are earnings from Microsoft (NASDAQ:MSFT), Meta, Apple (NASDAQ:AAPL) and Amazon.com, starting on Tuesday, which investors will watch to gauge if the AI-led equity rally has room to grow.
Technology behemoths have dominated Wall Street's record-breaking run, prompting investors to turn their attention to laggards such as mid and small caps.
"This is the correct time (for a rotation) because the Fed is more likely to cut rates, so this time it can be a little more long lasting," said Art Hogan, chief market strategist at B Riley Wealth.
The Russell 2000 small-cap index was up 0.1% after a three-week winning streak, just shy of levels last seen more than two-and-a-half years ago.
Hopes are pinned on the Fed signaling a rate cut in September in Wednesday's policy decision, with odds for a 25-basis-point reduction at 89%, according to the CME's FedWatch. Any hawkish commentary could put equities under renewed selling pressure.
"(Fed Chair) Powell will want to give the market a bit of a hint that their expectations are probably not out of bounds, that September could be the first rate cut," Hogan said.
A slew of employment reports this week, including the Non-farm Payrolls, will be scrutinized for insight into a somewhat easing labor market.
Crypto stocks such as Coinbase (NASDAQ:COIN) Global, Riot Platforms (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA) gained between 2.4% and 3.6% after bitcoin prices jumped to a seven-week high.
Abbott Laboratories (NYSE:ABT) dropped 4.1% to the bottom of the S&P 500 after a jury ordered it to pay $495 million in damages following a trial that found the healthcare company's formula for premature infants had caused a dangerous illness.
Advancing issues outnumbered decliners by a 1.23-to-1 ratio on the NYSE, and by a 1.09-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and one new low, while the Nasdaq recorded 73 new highs and 29 new lows.