Stocks closed mostly higher yesterday to start the week. Only the small-cap Russell 2000 finished lower, giving up -0.34%. But the Dow and the S&P 500 each notched another new all-time high close.

After all of the indexes closed higher last week for the second week in a row, most are off to another good start in an effort to make it 3 up weeks in a row.
 

Dow, S&P 500 eke out record closes

U.S. stocks climbed on Monday, with the Dow Jones Industrial Average and S&P 500  both reaching new record highs, continuing Wall Street's winning streak. Investors focused on remarks from Federal Reserve officials and a key inflation report for signals on the likelihood of another significant rate cut.

The Dow gained over 0.1%, building on Friday's all-time high close. The S&P 500 inched up more than 0.2%, also setting a new record, while the tech-focused Nasdaq Composite rose 0.1%.

The Dow Jones dipped 15 points early on, while both the Nasdaq and S&P 500 ticked up. S&P’s PMI reading showed the index had dipped from 54.6 to 54.4 in September, as service sector growth slowed and manufacturing remained in contraction territory for a third consecutive month.

Last week’s 50-basis point cut to base interest from the Federal Reserve had fuelled gains on Wall Street, prompting the S&P 500 to also hit a record.

Attention turns on Monday to US purchasing managers index data from S&P Global, which is due to be released later in the day.
 

“Once again, it is the services sector which remains the bright spot, although the strength of this sector also brings major concerns of another inflationary surge,” Scope Markets analyst Joshua Mahony commented.

PCE report expectations

The report everyone is eagerly anticipating is Friday's release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred measure of inflation.

Despite already beginning their rate-cutting cycle with last week’s 50 basis point reduction, and projecting rates to fall to 4.40% by the end of the year and 3.4% by the end of next year, the Fed has emphasized that their actions will remain data-driven. Friday's PCE report will provide insight into whether inflation continues to cool.

After Friday’s PCE data, attention will shift to next week’s Employment Situation report from the Bureau of Labor Statistics (BLS). With inflation easing, the employment report may carry even more weight. It will indicate whether the U.S. is on track for a soft landing, with slowing but steady job growth, or if a steeper downturn is looming, marked by larger-than-expected job losses.

Both reports are critical to the Fed’s decision-making, as they reflect the Fed's dual mandate: maintaining price stability (low inflation) and achieving maximum employment.