CNBC Daily Open: Markets defied expectations last month

This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Winning month and quarter 
U.S. markets rose on Monday to finish a winning month and quarter. Tesla popped 22.2% in September on anticipation of its robotaxi event. Asia-Pacific markets traded mixed Tuesday. The Nikkei 225 gained almost 2% as the unemployment rate in August eased to 2.5%, from 2.7% in July. China, Hong Kong and South Korea's markets are closed for a holiday. 

Different from 2015's bubble 
Major Chinese indexes surged on Monday, while trading volume hit a record high, according to Wind Information. While that may remind investors of the 2015 bubble, when the Chinese stock market doubled in value over six months, analysts think things are different this time. For one, the economy is still struggling, which is expected to weigh on spending during the Golden Week holiday this year, according to analysts.

"Not on any preset course" 
U.S. Federal Reserve Chair Jerome Powell on Monday gave a speech to the National Association for Business Economics, saying the central bank is "not on any preset course" for rate cuts. Powell, in response to a question, also said the Fed is likely to cut rates an additional half a percentage point by the end of 2024 "if the economy performs as expected." 

Nvidia competitor files for IPO 
Artificial intelligence chipmaker Cerebras Systems on Monday filed for an initial public offering on the Nasdaq. The startup says on its website that its chips have more cores and memory than Nvidia's H100, which is favored by the industry for running AI models. In a filing, Cerebras reported a net loss of $127.2 million on revenue of $78.7 million for 2023. 

[PRO] Fourth-quarter positioning  
Stocks finished the third quarter of 2024 on a high note. The S&P 500 closed off the period at a record high, while the Chinese CSI 300 blue-chip index popped on its last trading day of the quarter. Will markets continue performing so well as we enter the fourth quarter? CNBC Pro asks market experts how they're positioning before 2024 wraps up.  

The bottom line

The S&P 500 has fallen at least 4% in the last four Septembers. But the index charted a new trajectory this year to cap off a winning month and quarter. 

On Monday, the S&P rose 0.42% to close at a record level of 5,762.48. The Dow Jones Industrial Average was near the flatline, and the Nasdaq Composite climbed 0.38%.  

That gives the S&P a gain of around 2% for the month, its first September in the green since 2019. For the month, the Dow advanced 1.9% and the Nasdaq rose 2.7%. 

All indexes marked quarterly gains as well, despite the sell-off in the beginning of August.  

Notably, the Russell 2000, which comprises the 2,000 smallest stocks in the Russell Index, advanced 8.9% for the quarter. That outstrips the quarterly increase of S&P, Dow and Nasdaq, which added 5.5%, 8.2% and 2.6% respectively. 

Small-cap stocks tend to benefit from lower rates because they are more exposed to general economic conditions like the cost of debt and consumer sentiment. The Russell 2000 outperforming major indexes could be seen as a sign that the Fed's latest rate cut has begun affecting the markets.  

The performance of S&P sectors this quarter is another indication of how the rate cut is changing investors' behavior. While information technology and communications services have been the best performing sectors year to date, they were laggards this past quarter, gaining only about 1.4%. 

By contrast, utilities jumped 18.5% and real estate climbed 16.3% for the quarter. Both sectors generally provide dividends to investors, which become more attractive as fixed income yields fall in tandem with lower rates. Cheaper borrowing costs also have a disproportionate effect on utilities and real estate because those sectors require huge initial investments. 

With Powell saying monetary policy "will move over time toward a more neutral stance," the market rally has the potential to broaden further as more rate cuts take place. 

– CNBC's Robert Hum, Lisa Kailai Han, Alex Harring and Hakyung Kim contributed to this story.