Stock Market Today: Dow, S&P 500 Eke Out New Highs

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Stocks were little changed to start the new week as investors continued to digest last week's jumbo-sized rate cut from the Federal Reserve. Still, two of the three main benchmarks managed to end at fresh highs.

This week's economic calendar features a laundry list of central bank speeches, including one from Fed Chair Jerome Powell on Thursday. Today, Chicago Fed President Austan Goolsbee said that data supported the central bank's 50 basis-point rate cut (0.50%) at last week's meeting.

He added that interest rates "need to come down significantly going forward" so that the Fed can keep inflation near its 2% target and the labor market healthy.

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According to CME Group's FedWatch Tool, futures traders are currently pricing in 50-50 odds that the central bank will cut rates by either a quarter-percentage point or a half-percentage point at its next meeting in November.

Data show weakness in manufacturing sector but strength in services

Also in focus today were flash purchasing managers index (PMI) data from S&P Global, which showed the manufacturing sector contracted by a wider-than-expected margin in September, while the services sector grew at a faster pace than anticipated.

Manufacturing activity was dismal "as elevated prices, lofty borrowing costs, reduced credit availability, and job uncertainty weighed on order books," says José Torres, senior economist at Interactive Brokers.

And while servicers reported stellar demand, this was accompanied by "fiery price pressures," he adds.

Microsoft gets a rare downgrade

In single-stock news, Microsoft (MSFT) slipped 0.4% after the blue chip stock was hit with a rare downgrade from D.A. Davidson analyst Gil Luria.

The analyst cut his recommendation on the stock to Neutral (the equivalent of Hold) from Buy, saying the company's "significant lead" over Alphabet (GOOGL, -1.1%) and Amazon.com (AMZN, +1.2%) "is now diminished in both the cloud business and code generation business," which will make it harder for MSFT to outperform.

Wall Street is overwhelmingly bullish toward Microsoft. Of the 56 analysts covering the Dow Jones stock that S&P Global Market Intelligence tracks, 39 say it's a Strong Buy and 14 call it a Buy. Just three analysts have it at Hold and not one believes it's a Sell. This works out to a consensus Strong Buy recommendation.

Intel climbs on buyout buzz, possible Apollo investment

Intel (INTC, +3.3%) also made headlines Monday after reports surfaced at the end of last week that Qualcomm (QCOM, -1.8%) approached its fellow chipmaker about a possible takeover. According to The Wall Street Journal, "a deal is far from certain," and any potential buyout of Intel, which boasts a $96 billion market cap, would face a lengthy regulatory approval process.

Stifel analyst Ruben Roy believes a QCOM-INTC merger makes sense for Qualcomm in terms of "diversification into the PC market and synergies with the smartphone modem and applications processor business." However, he thinks it is unlikely the chipmaker "would be able to quickly improve INTC's positioning in data center/AI compute or manufacturing."

In other Intel news, a report from Bloomberg indicated Apollo Global Management (APO, +0.6%) is considering a $5 billion investment in the tech giant, though no deal has been formally announced.

Micron stock pops ahead of earnings

Micron Technology (MU) gained 2.9% ahead of the memory chipmaker's Wednesday evening turn on the earnings calendar.

"It's been roughly a year since memory prices bottomed, and in recent months there are signs that average-selling-price (ASP) strength is moderating," says Stifel analyst Brian Chin. He expects Micron to report "relatively inline" fiscal Q4 results but lowered his outlooks for fiscal Q1 and Q2.

However, Chin believes these lowered expectations are priced into the shares ahead of earnings and maintains a Buy rating on the semiconductor stock.

As for the main indexes, the Dow Jones Industrial Average rose 0.2% to 42,124 and the S&P 500 added 0.3% to 5,718, both finishing at new record closes. The Nasdaq Composite gained 0.1% to 17,974.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.