Finance

S&P 500 Hits New Highs as Fed-Cut Bets Increase: Markets Close

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4 days ago

July 12, 2024

S&P 500 Hits New Highs as Fed-Cut Bets Increase: Markets Close

(Bloomberg) — Stocks hit new all-time highs after the latest economic data reinforced expectations that the Federal Reserve will cut interest rates in September.

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About 90% of stocks in the S&P 500 rose Friday as the index reclaimed its 5,600 mark after falling the previous session. Tech megacaps rallied, although smaller companies continued to rise. The banks were hit at the start of the US earnings season, with the results of Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. failed to drive momentum in the sector.

Stock traders ignored the weak consumer confidence data and focused on the prospects for rate cuts that could ultimately benefit corporate America. Data also showed that producer prices rose slightly more than forecast, but the categories used to calculate the Fed’s preferred inflation measure, the personal consumption expenditures price index, were not that bad.

“We continue to expect the Fed to join the global rate-cutting cycle in September, easing by 50 basis points this year,” said Mark Haefele of UBS Global Wealth Management.

The S&P 500 recorded its 38th record this year. The Nasdaq 100 rose 1%. The Dow Jones Industrial Average was above 40,000. Nvidia Corp. led gains in big tech. Tesla Inc. recovered a day after falling more than 8%. The Federal Communications Commission is investigating a hack of AT&T Inc. customer data.

The yield on ten-year government bonds fell by one basis point to 4.20%. The pound is trading near its strongest level in a year against the dollar and its highest level in almost two years against the euro.

According to Krishna Guha of Evercore, a “new phase of the Fed” can keep the stock market afloat.

“We are now entering a new phase where preventive cuts (as opposed to reactive cuts driven by larger increases in unemployment) could reduce future growth prospects, he noted. “Provided the Fed does not act too slowly to halt the underlying weakening of the economy, this reduction in risks to future growth prospects will benefit market breadth and cyclical sectors.”

One of the biggest questions about last session’s market rotation — which notably improved breadth — is whether or not it’s a legitimate trend reversal from the past year and a half — or another head fake, according to Dan Wantrobski of Janney Montgomery Scott. .

“We will start by saying that it cannot technically be confirmed that yesterday’s action was the start of a longer-term sustainable trend,” he noted. “However, from a trading perspective, we believe we could continue to see further rotation in the short term as charts continue to point to the potential for mean reversion.”

“Bulls have endured a barrage of data this week,” says Nationwide’s Mark Hackett. “Market momentum remains relentless. Several key hurdles have been cleared, making profits the next likely market catalyst.”

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