S&P 500 approaches approach record highs on September Fed rate drop hopes
The benchmark S&P 500 and the Nasdaq remained close to record highs on Wednesday, reflecting a growing confidence among investors that the Federal Reserve may initiate a new cycle of monetary policy easing in the upcoming month. Indicators suggesting that US tariffs on imports have not completely permeated headline consumer prices provided a sense of relief for investors this week, as they seek to understand the ramifications of trade uncertainty on the economy.
In light of the data indicating an uptick in underlying price pressures, market participants also considered the recent softness in the labor market alongside a restructuring at the Federal Reserve, leading them to anticipate a possible dovish stance from the central bank in September. Market participants are currently incorporating a 25 basis points interest rate cut into their expectations, as indicated by the CME’s FedWatch Tool, an increase from 89.2 percent observed the previous week. The central bank made its most recent reduction in borrowing costs in December.
Treasury Secretary Scott Bessent expressed the view that an aggressive half-point cut could be on the table, particularly in light of the recent weak employment figures. Additionally, it is noteworthy that “the first word that came to my mind when I saw this CPI report yesterday” was stagflation, as articulated by Mark Hackett, chief market strategist at Nationwide. This observation comes in light of Tuesday’s data, which follows several other reports indicating a cooling economy.
“The slowdown that we’re observing is likely to be relatively transient, at least at this juncture.” Inflation remains a significant concern, particularly in light of the recent uptick observed. At 12:18 p.m. ET, the Dow Jones Industrial Average experienced an increase of 363.26 points, reflecting a rise of 0.82 percent, reaching a level of 44,821.52. Concurrently, the S&P 500 saw a gain of 9.34 points, translating to a 0.15 percent increase, bringing it to 6,455.15. The Nasdaq Composite also advanced by 15.77 points, which corresponds to a 0.07 percent rise, resulting in a value of 21,697.97.
The blue-chip Dow approached an all-time high, being just 1 percent away, while the Russell 2000 index, which monitors rate-sensitive small-cap companies, increased by 0.1.3 percent, reaching a six-month peak. Investors were observing developments in various sectors in light of the recent technology-driven surge in US equities, which has elevated the valuations of the S&P 500 beyond historical norms. Healthcare stocks, having faced significant challenges throughout the year, emerged as the frontrunners among the 11 S&P 500 sectors, achieving a 1.4 percent increase, whereas the tech-heavy Nasdaq 100 index experienced a slight decline.
Later in the day, market participants will closely analyze the statements of several policymakers, particularly those made by Chicago Fed President Austan Goolsbee. CoreWeave, supported by Nvidia, experienced a decline of 17.6 percent following the announcement of a quarterly net loss that exceeded expectations. Attention is focused on the unfolding situation regarding the China revenue-sharing agreement that the US government established with leading chip manufacturers, which the White House indicated may be broadened to include additional participants in the industry. Paramount Skydance experienced a notable increase of 30 percent. The firm secured exclusive broadcasting rights to the Ultimate Fighting Championship for a duration of seven years earlier this week.
In the realm of geopolitics, market participants exhibited a notable interest in the upcoming meeting between Trump and Russia’s Vladimir Putin concerning the Ukraine conflict, which is set to take place on Friday. On the NYSE, advancing issues surpassed decliners with a ratio of 2.96-to-1, while on the Nasdaq, the ratio stood at 2.28-to-1. The S&P 500 achieved 37 new 52-week highs and two new lows, whereas the Nasdaq Composite noted 131 new highs and 49 new lows.
