The stock market experienced notable gains on August 26, with the S&P 500 rising by 0.41%, driven by strong performances from companies like Nvidia and Eli Lilly. This uptick comes amidst growing concerns regarding the Federal Reserve's independence following U.S. President Donald Trump's decision to dismiss a central bank governor.
Shares of Nvidia (NVDA.O) climbed 1.1% as investors eagerly awaited its quarterly earnings report, scheduled for release late Wednesday. As the world's most valuable company, Nvidia's performance is critical, particularly in the context of the ongoing trade tensions between Washington and Beijing. The outcomes of this report could significantly influence the market sentiment surrounding AI-related stocks, potentially either fueling or dampening Wall Street's enthusiasm.
President Trump announced the removal of Fed Governor Lisa Cook due to alleged improprieties related to mortgage loans. This decision has intensified worries about the central bank's independence from political influences. S&P 500 futures momentarily dipped before recovering, as investors maintained their expectations that the Federal Reserve would initiate interest rate cuts in September. Bill Merz, head of Capital Market Research at U.S. Bank Wealth Management, noted that while the long-term implications of political influence are concerning, the immediate trajectory of interest rate policy is likely to shift towards easier monetary policies in the coming months.
Despite persistent inflation pressures, traders are predicting a 25-basis-point interest rate cut at the Fed's September meeting. This sentiment is bolstered by dovish signals from Fed Chair Jerome Powell, recent labor market data indicating weakness, and the recent shakeup at the central bank. Morgan Stanley has also forecasted an interest rate cut for September, although upcoming inflation and jobs reports may lead investors to reevaluate their expectations.
Shares of Eli Lilly (LLY.N) surged nearly 6% following the announcement of an experimental pill that successfully reduces body weight by 10.5% in diabetes patients. This breakthrough has positioned Eli Lilly as a significant player in the pharmaceutical market, particularly in diabetes treatment.
The S&P 500 closed at 6,465.94 points, nearing its record high from August 14. The Nasdaq gained 0.44%, finishing at 21,544.27 points, while the Dow Jones Industrial Average rose 0.30% to 45,418.07 points. Among the 11 S&P 500 sector indexes, seven experienced gains, with industrials leading the way at 1.03%, followed by a 0.76% increase in financials.
Advanced Micro Devices (AMD.O) saw a 2% increase after Truist Securities upgraded its rating from hold to buy. Additionally, EchoStar (SATS.O) skyrocketed 70% to a record high after AT&T (T.N) announced it would acquire specific wireless spectrum licenses from the satellite communications company for approximately $23 billion.
During the trading session, advancing issues outnumbered falling ones within the S&P 500 by a ratio of 1.1-to-one. The index recorded 21 new highs and 2 new lows, while the Nasdaq noted 120 new highs and 59 new lows. Overall trading volume on U.S. exchanges was relatively subdued, with 15.7 billion shares exchanged compared to an average of 16.9 billion shares over the preceding 20 sessions.
Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru, and by Noel Randewich in San Francisco; Editing by Devika Syamnath and Matthew Lewis. Our Standards: The Thomson Reuters Trust Principles.
