Wall Street’s expectations are now focused on the usual symposium of central banks in Jackson Holewhich is now the main focus of the market as economic data suggests a possible interest rate cut in September by the Federal Reserve (Fed).
The recent inflation data in the US raise the possibility that the Fed will reduce interest rates for the first time in more than four years at its September meeting. However, questions remain about the exact extent of the possible reduction.
At Polymarket, bets on a rate cut by the Federal Reserve at its September meeting are giving a 81% chances of doing so at 25 basis points versus 15% who estimate it at 50 bps.
Many on Wall Street had been calling for an aggressive 50 basis point cut following the weak July nonfarm payrolls report earlier in the month, but this week’s strong retail sales data has boosted optimism about the U.S. economy, suggesting a more moderate 25 basis point reduction is possible.
Attention next week will be on Federal Reserve Chairman Jerome Powell at the annual central bank symposium in Jackson Hole, Wyoming, and UBS (SIX:UBSG) expects the Fed chairman to downplay the chance of a 50 basis point rate cut.
Wall Street: What the futures say
In the stock market, these expectations have been well received, driving the major indexes to record notable gains. The S&P 500, a broad market gauge, is on track for a weekly gain of more than 3%, while the technology-dominated Nasdaq Composite is set for an advance of more than 5%, which would represent its best weekly performance since November. Meanwhile, the Dow Jones Industrial Average, an index made up of large benchmark companies, is up more than 2% for the week, which would be its best performance so far this year.
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Reuters
These moves reflect investor optimism that monetary policy could ease, which could provide a more favourable environment for stocks, and particularly for technology stocks, which tend to be sensitive to fluctuations in interest rates. However, some caution remains, as the Federal Reserve’s decisions will continue to depend on the evolution of economic data in the coming weeks.
Source: Ambito
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