US Stock Market Closes At Record Highs As Traders Anticipate Fed Rate Cut

Wall Street traders pushed stocks higher as bond yields fell, following weaker-than-expected economic reports. These reports bolstered the case for the Federal Reserve to cut rates this year. In a shortened session before the US holiday, the S&P 500 reached a new all-time high, driven by expectations that Fed policy easing will continue to support Corporate America.

Treasuries climbed as data revealed the services sector contracted at its fastest pace in four years. Additionally, private payrolls grew at a slower rate, and continuing jobless claims rose for the ninth consecutive week. "Bad news is good news," said Fawad Razaqzada at City Index and Forex.com. "That's how risk assets reacted in the aftermath of today's US data releases, which all came out weaker than expected."

Market Reactions and Projections

The S&P 500 rose to around 5,535, marking its 33rd record in 2024. Tesla Inc. extended its rally into a seventh straight session, leading gains among megacaps, although Amazon.com Inc. saw a decline. The stock market closed at 1 p.m. New York time, while Treasuries were recommended to close at 2 p.m., coinciding with the release of Fed minutes.

Treasury 10-year yields dropped nine basis points to 4.34%. Swap traders are now projecting nearly two rate cuts in 2024, with the first expected in November; however, bets on a September reduction have increased. The dollar also slipped.

Fed Chair Jerome Powell noted that recent economic data suggest inflation is on a downward path but emphasized that more evidence is needed before lowering interest rates. He highlighted the delicate balance between controlling inflation and preventing significant deterioration in the labor market.

Investor Sentiments and Economic Indicators

A survey by 22V Research indicated that 40% of investors believe Friday's employment data will have a negligible or mixed impact on the market. Meanwhile, 34% expect a "risk-on" reaction and 26% anticipate a "risk-off" response. Dennis DeBusschere at 22V remarked that investors are primarily focused on payrolls.

"The focus on wage growth has dropped some," DeBusschere said, "which is surprising given Powell's explicit focus on wages yesterday." The survey also showed an "upside skew" to unemployment rate assumptions.

Fed Bank of New York President John Williams countered recent commentary suggesting that the natural rate of interest has risen since the pandemic. This long-run natural rate of interest is crucial for monetary policy but cannot be directly observed.

Corporate Highlights and Key Events

This week saw several key events influencing markets: Stocks surged, currencies fluctuated, cryptocurrencies experienced volatility, bonds climbed, and commodities shifted. Mark Hackett at Nationwide commented on investor sentiment: "Clouds are developing in the macro picture, but the glass-half-full mindset of investors continues to drive markets higher."

Traders will gain further insight into the American labor market with Friday's report. Economists predict a June nonfarm payroll increase of 190,000 — lower than the previous month — with unemployment holding steady at 4%.

Don Rissmiller at Strategas noted that until employment weakens significantly, there remains fundamental support for the US economy despite some signs of slowing. He added that Fed members want more progress on inflation before making further decisions.

This article was generated from an automated news agency feed without modifications to text.