Market close snapshot
In New York on Sept. 3, U.S. stock indices closed with the Dow Jones Industrial Average and the S&P 500 at fresh record highs, while the Nasdaq Composite edged lower as large-cap tech names pulled back. The session reflected a market that is broadly constructive on the economy amid growing expectations for Federal Reserve rate cuts, even as the government enters a new phase of funding uncertainty.
Drivers behind the Dow and S&P rally
Traders cited a confluence of factors supporting a shift toward expected monetary easing. Softer signals from the Institute for Supply Management’s non-manufacturing index for September helped bolster the case for additional rate cuts. The index’s employment component remained below the 50-mark for a fourth consecutive month, underscoring a softening service sector and a cooling labor market. This backdrop contributed to the market pricing in higher odds of a Federal Reserve rate cut in the coming months, even as fiscal headwinds persist due to the government shutdown.
Policy expectations and risk factors
Analysts noted that the ongoing government shutdown has added an uncertain backdrop, prompting traders to reassess growth projections and the central bank’s response. Edward Jones’s Mona Mahajan pointed out that since the shutdown began, markets have priced in a higher probability of a Fed rate cut, reflecting concerns about potential adverse effects on the economy and inflation dynamics. These expectations helped keep the major indices near record territory, even as some high-valuation tech names retreated on concerns about demand and competition.
Key stock and sector moves
Among notable individual moves, semiconductor-equipment maker Applied Materials dropped about 2.7% after signaling a roughly $600 million negative revision to its 2026 revenue outlook. Electric-vehicle leader Tesla also slipped around 1.4%, as investors weighed growth prospects against broader tech-led weakness. On the other side, the S&P 500 utilities sector advanced roughly 1.2%, reflecting a preference for defensive plays as market participants seek stability amid heightened policy uncertainty.
Market breadth and trading activity
Market breadth remained favorable on the NYSE, with advancers outperforming decliners by about 1.72 to 1. On the Nasdaq, the advancer/decliner ratio stood around 1.5 to 1 in favor of gainers. The blended U.S. exchanges saw roughly 20.47 billion shares change hands, above the near-term 20-day average of about 19.01 billion, signaling healthy participation despite the split tone between indices.
Outlook for the near term
With the ISM data showing a softer service sector and a cooling employment picture, investors will be watching for further evidence on the economy’s resilience and the Fed’s policy path. The market’s split behavior – strength in the Dow and S&P versus pressure on tech-heavy Nasdaq – suggests traders are weighing slower growth against the potential for policy easing. If incoming data continue to temper inflation and growth signals, more rate-cut expectations could support equities broadly, while any signs of renewed growth gaps could reintroduce volatility, particularly in high-growth tech names.
