Stocks Resilient Amid Fed Chair's Cautious Stance

US stocks wavered on Monday but remained poised for strong monthly and quarterly gains as investors reacted to Federal Reserve Chair Jerome Powell's vow to maintain the economy's momentum, while signaling a measured approach to future rate cuts.

Navigating the Shifting Economic Landscape

Powell Strikes a Balanced Tone

Federal Reserve Chair Jerome Powell struck a balanced tone in his recent speech, emphasizing the overall strength of the US economy while cautioning against a hasty approach to future rate cuts. Addressing the National Association for Business Economics in Nashville, Tennessee, Powell stated, "Overall, the economy is in solid shape; we intend to use our tools to keep it there." This sentiment appeared to lower expectations for another significant rate reduction, as market bets for a 50-basis-point cut dropped from 53% to 35% on Monday afternoon.Powell's remarks highlighted the Fed's commitment to using its tools to sustain the economy's momentum, but he also made it clear that the central bank is not on a predetermined path and is in no rush to quickly cut rates. "This is not a committee that wants to cut rates quickly," he added, referring to the Federal Open Market Committee (FOMC), which sets the direction of interest rates.

Investors Brace for Key Economic Data

As the final trading day of September and the third quarter approaches, investors are closely monitoring a slew of economic data, particularly the crucial September jobs report, due out on Friday. This report is seen as a crucial test for the recent market rally, as it will provide insights into the pace of labor market slowdown and the overall health of the US economy.Wall Street strategists argue that the market's reaction to the jobs data will depend on the underlying reasons for the Fed's actions. Citi's head of US equity trading strategy, Stuart Kaiser, explained that a scenario where the Fed isn't cutting because the economy needs it would be "hugely bullish" for equities. Conversely, a weaker-than-expected jobs report could signal that the Fed is cutting rates due to legitimate concerns about economic weakness, which may not be enough to support a continued rally in stocks.

Automakers Face Headwinds

The mood in the market was clouded by a growing pile of profit warnings from automakers on Monday. Stellantis, the parent company of Chrysler, saw its shares tumble 13% after slashing its margin outlook for the year. The company cited supply chain disruptions and weakness in the Chinese market as the primary factors behind the downgrade.The ripple effects were felt across the industry, with General Motors and Ford both declining around 4% in tandem. Aston Martin, the luxury automaker, also warned on earnings, leading to a plunge of over 20% in its share price.

Global Markets Diverge

While the US markets grappled with the mixed signals, global markets exhibited a more varied performance. In China, the benchmark stock index posted its biggest gain since 2008, entering a bull market as buyers rushed in ahead of a weeklong holiday. However, in Japan, the Nikkei 225 index tumbled as a surprise vote wrong-footed investors who had been betting on an easing-friendly prime minister.

Chevron Secures Hess Acquisition

Amidst the broader market volatility, Chevron's stock rose close to 0.6% on Monday following news that the US Federal Trade Commission (FTC) had cleared the company's $53 billion acquisition of Hess Corp. The FTC, however, barred Hess CEO John Hess from serving on Chevron's board, citing concerns over his potential influence on OPEC's production decisions.The deal will give Chevron access to the oil-rich offshore fields of Guyana, further strengthening the company's position in the energy sector. Despite the FTC's order, Exxon Mobil's challenge to the deal remains a final obstacle that Chevron must overcome.

Nvidia Faces Headwinds in China

Nvidia's stock slipped around 1% in early trading, following a report that Beijing is urging Chinese companies to buy from chipmakers within its own borders rather than Nvidia's popular GPUs. The semiconductor giant has designed special chips for China since the US ramped up export controls on semiconductors to the country in late 2022. Nvidia is reportedly working to bring online a version of its latest Blackwell chips for the Chinese market as well.Despite the trade tensions and volatility in the semiconductor sector, analysts remain bullish on Nvidia, with about 90% of Wall Street analysts recommending buying the stock and seeing it rise to $147.61 over the next year, according to Bloomberg consensus estimates.