Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) recovered from an early morning plunge and closed in positive territory on Monday.
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The market got off to a rocky start after the Institute for Supply Management (ISM) U.S. Manufacturing Index fell by 0.4 points month-over-month to 48.7, below the estimate of 49.1. A reading above 50 signals expansion, while a reading below 50 signals contraction. Index respondents remain concerned about economic policies and tariffs, with one respondent in the computer and electronic products industry saying, “The unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing/cost. But even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S.”
Next, President Trump warned in a Truth Social post that the U.S. would be “defenseless” and “could be reduced to almost Third World status” if his tariffs are revoked by the Supreme Court. The nation’s highest court is set to begin hearings on Wednesday to determine whether the 1977 International Emergency Economic Powers Act (IEEPA) allows Trump to enact sweeping tariffs. If overturned, the U.S. could be responsible for billions of dollars of tariff refunds.
Meanwhile, statements from Fed officials Lisa Cook, Austan Goolsbee, and Mary Daly have dampened hopes for a December rate cut. “I’m not decided going into the December meeting,” Goolsbee told Yahoo Finance, with Cook adding that Fed “policy is not on a predetermined path.”
On the other hand is Fed Governor Stephen Miran, who argued that rates are too restrictive and could cause economic disruption. He warned that maintaining such tight policy for an extended period could trigger a recession and pressed for a larger 50 bps cut at the previous two Federal Open Market Committee (FOMC) meetings. An additional rate cut by year-end is the most likely outcome, with CME’s FedWatch tool assigning 67.5% odds of a 25 bps cut and 32.5% odds of an unchanged rate.
Finally, Evercore ISI expects the S&P 500 (SPX) to reach 7,750 by the end of 2026, although the firm also calls for near-term volatility ahead of positive fourth-quarter seasonality. Analyst Julian Emanuel notes that there are no signs of the bull market ending, which include a hawkish Fed and slowing investments in AI.
The S&P 500 (SPX) closed with a 0.17% gain, while the Nasdaq 100 (NDX) returned 0.44%.
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