Wall Street’s Relentless Stock Market Rally Faces Hawkish Fed Test

investing.com:

The busiest week of the summer on Wall Street has arrived, with all eyes on the upcoming Federal Reserve rate decision, as well as earnings from some of the biggest companies in the world.

Entering the crucial week, the stock market rally has notably broadened, with the blue-chip Dow Jones Industrial Average rising for the 11th straight session on Monday to notch its longest winning streak since February 2017.

The tech-heavy Nasdaq Composite, which led the market higher during the first half of the year, has actually been the laggard over the past two weeks as investors looked to non-tech stocks for bargains, lifting sectors from energy, healthcare to banks.

After remaining on hold at its June meeting, the U.S. central bank is widely expected to raise interest rates by 25 basis points following the conclusion of its Federal Open Market Committee meeting.

That would put the benchmark Fed Funds target range between 5.25% and 5.50%, the highest since January 2001.

At the previous Fed meeting last month, Powell warned the market that FOMC members saw it appropriate to raise the policy rate at least twice more this year in their ongoing battle to bring down stubbornly high inflation.

However, traders are betting that Wednesday’s move will likely be the final rate hike in the Fed’s historic tightening campaign, which began in March 2022 and saw CPI peak at 9.1% last summer.

According to the Investing.com Fed Rate Monitor Tool, there is a likelihood of just 31% for an additional rate increase by year-end, while odds for a rate cut stand at about 8% despite Powell’s repeated warnings to the contrary.

Indeed, inflation is trending lower according to recent data, which revealed that U.S. consumer prices rose 3.0% in the 12 months