CNBC Daily Open: Rate cuts might not benefit tech the most

Record close for Dow
The S&P 500 and Dow Jones Industrial Average rose on Monday, with the Dow notching a record close. But the Nasdaq Composite fell. Asia-Pacific stocks were mixed. Japan's Nikkei 225 fell 1.03% as the Japanese yen strengthened to 140.54 against the U.S. dollar. Hong Kong's Hang Seng index climbed 1.15% as Midea Group shares jumped over 9% in their Hong Kong debut.

Next move for the BOJ
The Bank of Japan won't be raising interest rates at its September meeting, according to a CNBC survey of 32 analysts. However, the outlook for its October and December meetings is less certain. Almost 20% think an October hike is likely, while 25% said the bank's next hike will be in December.

India's slowing deposit growth
Reserve Bank of India Governor Shaktikanta Das told CNBC in an exclusive interview that slowing growth in deposits is not a cause for concern currently, and said banks are "coming out with new products for deposit mobilization."

Intel forges new path for foundry
Intel shares popped around 8% in extended trading on news the chipmaker plans to structure its foundry business as an independent unit with its own board and ability to raise outside funding. It might even spin off the business as a public company, according to a person with knowledge of the matter. Separately, the Biden administration on Monday awarded Intel up to $3 billion under the CHIPS Act.

[PRO] "Golden age of fixed income"
The U.S. Federal Reserve is poised to cut interest rates this week. Benchmark rates affect borrowing costs. This means bond yields will go down as the Fed lowers rates. Rick Rieder, BlackRock's global chief investment officer of fixed income, thinks now's the time for investors to take advantage of this "golden age of fixed income."

Technology stocks benefit the most from low interest rates, conventional market wisdom says.

That's because tech companies tend to promise future profit in exchange for present money. When rates are low, that proposition appears attractive because returns are low elsewhere. But when rates are high, those promises don't seem as attractive as less risky returns from assets such as Treasurys.

The past two years have demolished this narrative. Tech has soared even as interest rates have been at 23-year highs, thanks to enthusiasm over artificial intelligence's promise of new and explosive revenue streams.

Nvidia, the lynchpin of AI, has soared nearly 136% just this year. Meta, which has its own AI model named Llama, is up about 51%.

With the market pricing in a 67% chance — up from 30% last week — that the U.S. Federal Reserve will make a larger-than-usual cut of 50 basis points, according to the CME FedWatch Tool, it stands to reason tech will pop further.

The sector, however, has been rocky in recent weeks. The VanEck Semiconductor ETF, for instance, fell 1.31% Monday, while Nvidia slipped 1.95%.

The tech-heavy Nasdaq Composite fell 0.52%, while the S&P 500 inched up 0.13% and the Dow Jones Industrial Average added 0.55% to close at a new record.

This implies investors have been moving out of tech to other sectors that might experience tailwinds amid lower rates. Case in point: the financial and energy sectors rose more than 1% on Monday, performing better than the broader market.

Goldman Sachs noted hedge funds' weekly purchases last week of financial stocks were the highest since June 2023.

"Other areas of the market are starting to perk up, and a lot of that has to do with the future rate cuts that are coming into play," said Christopher Barto, senior investment analyst at Fort Pitt Capital.

That doesn't mean tech's out of favor. It's likely to continue driving the market. But other sectors might show up for the ride.

– CNBC's Hakyung Kim, Pia Singh and Yun Li contributed to this story.