US stocks drifted lower on Tuesday, retreating from record highs as investors waited for the start of a Federal Reserve meeting that should signpost the path of interest rates.
The S&P 500 (^GSPC) fell 0.5%, while the tech-heavy Nasdaq Composite (^IXIC) dropped roughly 0.2% on the heels of both notching all-time closing highs. The Dow Jones Industrial Average (^DJI) dropped more than 350 points, or 0.9%.
Stocks have managed to make headway amid market uncertainty about an economy that may be too hot or too cold for comfort. A string of inconclusive data has fueled skepticism about the likelihood of three rate cuts in 2024, as envisaged by the Fed in March. Many investors now predict just one reduction before the year’s end.
The two-day Fed policy meeting that kicks off Tuesday is heavily expected to end with borrowing costs kept at their two-decade high. Investors will still watch out for hints on when a shift to cuts will come, with September or November in the frame.
Investors calculating the rate-reduction odds are also looking ahead to May consumer price data due out on Wednesday, given its crucial role in the Fed’s deliberations.
In individual stocks, Apple (AAPL) shares rallied 3% following losses from the prior session after the iPhone maker’s big AI debut. Meanwhile, Eli Lilly (LLY) shares popped after the drugmaker’s early-stage Alzheimer’s treatment got unanimous backing from a panel of FDA advisers.
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Apple rallies almost 3% as Wall Street weighs in on AI-filled event
“The release of the AI features across Mac, iPads and iPhones will support an upgrade cycle across all the devices” wrote JPMorgan analyst Samik Chatterjee in a note to clients. The analyst has an Overweight rating on the stock.
Meanwhile Apple was raised to a Buy from Neutral with a $230 price target at D.A. Davidson on the “expectation of an iPhone upgrade cycle.”
Investors bought the dip as shares erased the previous session losses.
Stocks drift lower as market eyes Fed meeting
Stocks opened lower on Tuesday with the Federal Reserve set to kick off its two-day policy meeting.
The S&P 500 (^GSPC) fell about 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) dropped slightly on the heels of fresh all-time closing highs for both indexes. The Dow Jones Industrial Average (^DJIA) was down 0.4%.
The major averages have managed to inch higher despite uncertainty about the economy and scaled-back expectations for rate cuts. Most investors anticipate the Federal Reserve will reduce rates only one time before the end of the year.
On Wednesday afternoon, the Federal Open Market Committee (FOMC) is expected to announce its policy decision following a two-day meeting. Monthly inflation data will also be released on Wednesday, prior to the market open.
Apple (AAPL) shares gained about 2% in early trading, reversing losses from the prior session that followed the iPhone maker’s introduction of AI features at its World Wide Developer Conference on Monday.
Cryptocurrency-related stocks opened lower on Tuesday as bitcoin (BTC-USD) fell to a one-week low, trading just above $69,000 per token. Coinbase (COIN), Marathon Digital (MARA), and MicroStrategy (MSTR) were all down more than 3% in early trading.
The Street is giving Apple a high-five on the technology itself, but what is unclear is if it’s enough to spur a stock price-moving iPhone upgrade cycle.
JP Morgan on the event:
“We continue to expect the start of a device upgrade cycle for iPhones later this fall (largely FY25 for Apple) with the upgrade cycle likely peaking with the launch of the iPhone 17 in 2025 (largely FY26 volumes for Apple).”
KeyBanc on the event:
“We believe WWDC is a sell-the-news event where the bulls’ view, centered around an “iPhone Super Cycle” triggered by Apple intelligence (AI) being integrated into Apple’s products, will likely be seen as disappointing. While WWDC introduces new software features across iOS, iPad OS, macOS, and visionOS that are often useful, they are not compelling, in our view, for the average consumer to purchase a new device.”
The stock is down slightly in premarket trading.
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