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Morgan Stanley warns: The market is "pressuring" the Federal Reserve to delay interest rate cuts

2024-03-06

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U.S. stocks fell on Monday, with JPMorgan strategist Marko Kolanovic concerned that the market was moving higher while volatility was at lower levels and that bubbles at the top were growing.

"Stocks continue to hit new highs, which could be a sign that a bubble is building up in the market," Kolanovich, a widely followed Wall Street strategist, wrote on Monday. "This could keep monetary policy elevated for longer, as cutting rates too early could further push up asset prices or cause inflation to rise again."

AI darling Nvidia rose more than 3%, with the superminicomputer company soaring 18% after S&P Dow Jones Indices announced it would join the S&P 500 later this month.

But other technology stocks ended up dragging down the market, with the S&P 500's communications services sector leading the decline. Apple shares fell 2.5% after the European Union slapped the company with an antitrust fine of nearly $2 billion. Tesla shares fell more than 7% after announcing new price discounts and incentives late last week.

In addition to technology stocks, Ford shares rose more than 2% due to strong sales data. Macy's shares surged more than 13% after Arkhouse Management and Brigade Capital Management raised their bids for the department store company.

Monday's losses come as markets have surged over the past few weeks, fueled by artificial intelligence. The tech-heavy Nasdaq hit a record high on Friday, breaking its 2021 record and becoming the last major index to close at a record this year.

"Investors are wondering: Should we take profits at this point or should we hold on?" said Sam Stovall, chief investment strategist at CFRA Research. With the market down a bit, "I would be inclined to say investors are just sitting there and doing nothing."

This week, traders will be looking for clues on the future direction of interest rates from Federal Reserve Chairman Jerome Powell. Powell will deliver his latest monetary policy report to the House of Representatives on Wednesday and the Senate on Thursday.

The ADP employment survey and January job openings data will be released on Wednesday, providing further insight into the labor market. February manufacturing and non-farm payrolls data will be released on Friday.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Morgan Stanley warns: The market is "pressuring" the Federal Reserve to delay interest rate cuts

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