Stocks approach all-time highs as Fed minutes lift rate cut hopes
Stocks and bonds pushed higher after the latest Federal Reserve minutes and a big downward revision of US payrolls reinforced bets officials will cut rates in September.
The S&P 500 came closer to its all-time highs. Treasury yields fell across the curve, with the move led by shorter maturities that are more sensitive to imminent Fed moves. Swaps are pricing in about 100 basis points worth of easing in 2024. The implied rate on the contracts show traders expect a quarter-point cut next month — and a roughly 20% chance for a half-point reduction.
In the run-up to Jerome Powell’s Friday speech in Jackson Hole, traders are scouring minutes from the latest Fed policy meeting on Wednesday. Several Fed officials acknowledged there was a plausible case for cutting interest rates at their July meeting before the central bank’s policy committee voted unanimously to keep them steady.
“The Fed minutes removed all doubt about a September rate cut,” said Jamie Cox at Harris Financial Group. “The Fed’s communication strategy is to make its meetings less of a market moving event, and they are following the script to the letter.”
While the annual revision to jobs growth wouldn’t usually impact trading, it got attention this time around due to the recent concern the labor market is cooling too much amid high rates. The number of workers on payrolls will likely be revised down by 818,000 for the 12 months through March. It was the largest downward revision since 2009.
“The main message from the revisions in my mind is reinforce just how ‘silly’ it is to let the next jobs number be the determinant in whether to go 25 or 50 in September,” said Neil Dutta at Renaissance Macro Research. “What this revision data imply is that whatever the next
Read more on investmentnews.com
