US Stocks Rally on Fed Cut Hopes – Nasdaq up 2%
All three of the major US stock indices rallied strongly on the first day of trading for the week yesterday as investors factored in a 25-basis-point interest rate cut from the Fed in September. The Dow added 1.34% to move up to 44,173, the S&P gained 1.47% to 6,329, and the tech-heavy Nasdaq jumped 1.95% to 21,053. The dollar took another step lower after Friday’s poor job numbers, the DXY down 0.42% to 98.72, while yields also eased further after Friday’s crash, the 2-year down 0.7 of a basis point to 3.675% and the 10-year off 2.4 basis points to 4.192%. Oil prices dropped again as oversupply concerns continued to weigh, Brent off 1.39% to $68.70 and WTI off 1.65% to $66.23 a barrel. Gold moved higher in line with the weaker dollar, up 0.30% to $3,372.94 by the NY close.
Dollar to Remain Volatile in Days Ahead
Currencies saw huge moves last week as the markets were hit by an avalanche of fresh data, central bank updates, and US tariff news. The dollar index (DXY) rose nearly 3% from its low as traders piled into the greenback on the back of much-reduced tariff trade deals from the US with several countries and a hawkish Fed meeting. However, it did seem to be a bit of a case of “up the stairs and down the elevator” when US employment data hit on Friday. Not only was the headline data lower than expected, but the previous month’s revision was considerably so, and that has now led to the market pricing in over a 90% chance of a Fed rate cut in September and has seen the DXY retrace a large chunk of last week’s move, dropping nearly 1% just on Friday. The dollar will now battle between a more dovish Fed outlook and a more positive trade situation, which should be positive for the greenback.
Another Quiet Calendar Day Ahead for Traders
Traders are preparing for another quieter trading day ahead today with very little on the macroeconomic calendar in the sessions ahead. The Asian session is set to open on the front foot after a strong day on Wall Street yesterday, and investors are hoping for smoother trading conditions. The European session sees a raft of Final PMI numbers out across jurisdictions, but most are expected to confirm the Flash numbers that were released a couple of weeks ago. There is some key data due out once New York opens, with the US ISM Services PMI number set to drop. Market expectations are for a 51.5 result, up from last month’s 50.8 print, and traders are expecting some volatility around the event. However, most expect any further trade and geopolitical updates to dominate sentiment.
