Stocks Rally as Powell Lowers Rate Cut Expectations – S&P Up 0.4%
US stock markets held strong yesterday, despite Federal Reserve Chair Jerome Powell signalling no urgency to cut interest rates. Powell indicated that he foresees an additional 50 basis points of increases before the year’s end. Both the S&P and Dow recorded all-time high closes, though the movements were modest. The Dow gained a mere 0.04%, while the S&P and Nasdaq fared slightly better, rising 0.42% and 0.38%, respectively.
US Treasury yields responded sharply, with the 2-year yield jumping 8.8 basis points to 3.651%, and the benchmark 10-year rising 4.9 basis points, trading at 3.800% once again. The US dollar, which has been under pressure, strengthened by 0.42% on the index, closing around 100.86. Meanwhile, oil prices remained subdued, staying within recent ranges, with Brent down just 0.08% at $71.77 and WTI barely moved, down 0.01% at $68.17. Gold retreated from record highs, dropping 0.9% as the dollar surged, ending the New York session at $2,634 an ounce.
Markets to Reevaluate Fed Rate Cuts
This week’s market movements are likely to be shaped by shifting expectations around Federal Reserve rate cuts, with a slew of US data releases on the horizon. Powell’s comments last night have given investors pause, as he suggested only 50 basis points in further cuts are likely this year. Some market participants had anticipated another one or two 50-point cuts extending into 2025. Should Powell’s predictions hold true, we could see disappointment among investors and corrections in recent market movements, which were spurred by the FOMC’s aggressive rate cut two weeks ago.
For the next few days, traders will be closely monitoring data, culminating in the key US employment report on Friday. If upcoming data meets or exceeds expectations, rate cut forecasts may diminish, and the markets will likely react accordingly.
Key Data in Focus for Traders Today
The macroeconomic calendar ramps up today, with a busy schedule of data releases over the coming days, particularly in the US. Attention initially shifts to antipodean markets, where we’ve already seen New Zealand’s NZIER Business Confidence come in stronger than previously, and focus now turns to Australian Retail Sales data, which is expected to show a 0.4% month-on-month increase.
Meanwhile, Chinese markets are closed for the next four days in observance of Golden Week, after closing on a high yesterday, buoyed by recent stimulus measures. The Euro will take centre stage as the London session opens, with key Eurozone CPI figures due for release early in the day. Later, the US will see the first employment-related figures for the week, with JOLTS Job Openings data expected to print at a slightly lower 7.64 million. Traders will also pay close attention to ISM Manufacturing PMI data, released simultaneously. Several Federal Reserve officials are set to speak at an event in Atlanta this afternoon, and any fresh remarks on rate cuts could reverberate through the markets.
