US Markets Rally After Fed Minutes – Nasdaq Up 0.6%
US stock markets rallied once again in yesterday’s trading session, as the release of the Federal Reserve’s meeting minutes, coupled with a significantly weaker revised jobs data update, reinforced expectations of a rate cut by the FOMC in September. The Nasdaq led the charge, closing 0.57% higher, followed by the S&P, which gained 0.42%, while the Dow edged up by 0.14%. US Treasury yields continued their decline, reaching fresh two-week lows. The 2-year yield dropped by 7.2 basis points to 3.928%, while the benchmark 10-year yield fell by 2.6 basis points to close at 3.791%. Oil prices continued their downward trend, with Brent losing 1.49% to settle at $76.05, and WTI declining by 1.69% to $71.93 per barrel. Gold prices remained elevated near recent all-time highs, closing the New York session up by 0.1% at $2,516 an ounce.
Odds of a Fed Rate Cut Rise – 50 Basis Points Now at 37%
The likelihood of a more substantial rate cut by the Federal Reserve in September increased sharply overnight, following a revised jobs report that highlighted a weaker labour market than previously estimated. The Bureau of Labor’s latest update, covering April 2023 to March 2024, revealed a 0.5% reduction in jobs, equating to 818,000 fewer jobs than originally calculated. The FOMC minutes further indicated that some members were already inclined to cut rates last month, with the vast majority expected to endorse an easing in September. The critical question now is whether the cut will be 25 or 50 basis points, with the odds for the latter rising from 25% to 37% after the latest updates. The market has been trending in this direction over the past week, and investors will be closely watching Jerome Powell’s remarks at Jackson Hole on Friday to see if the momentum continues.
Busiest Calendar Day for Traders, but All Eyes on Wyoming
Today marks the busiest day on the macroeconomic calendar this week, though most investors are already looking ahead to Jerome Powell’s anticipated comments at Jackson Hole, Wyoming, on Friday, which are expected to confirm the Fed’s upcoming moves. A series of Flash Services and Manufacturing PMI data releases are due across various jurisdictions, including Australia, France, Germany, the Eurozone, the UK, and the US. However, traders expect any impact to be minimal unless the figures deviate significantly from expectations. In addition to the US data, the latest weekly unemployment claims and Existing Home Sales figures are set to be released, though most expect market movements to be driven primarily by yesterday’s US updates and the forthcoming central bank announcements from Wyoming.
