Nasdaq 100, Dow Jones, S&P 500 News: Wall Street Surges Amid Fed Rate Cut Expectations

Wall Street Rises on Growing Hopes for Fed Rate Cuts

Wall Street experienced notable gains on Monday, buoyed by increasing expectations of imminent interest rate cuts by the Federal Reserve. This optimism was fueled by lackluster payrolls data released last week.

At 14:48 GMT, the Dow Jones Industrial Average is trading 38770.15, up 94.47 or +0.24%. The S&P 500 Index is at 5157.81, up 30.02 or +0.59% and the Nasdaq 100 Index is trading 16256.59, up 100.27 or +0.62%.

What’s Driving the Price Action?

The S&P 500 and the Dow surged to three-week highs, responding positively to reports of a significant slowdown in job growth for April. This unexpected downturn in employment figures alleviated pressure on the Federal Reserve to maintain its current interest rate stance.

Traders responded swiftly to the soft jobs report, adjusting their expectations for future rate cuts. Currently, markets are pricing in a total reduction of 48 basis points by the end of 2024, a stark contrast to previous forecasts, which had anticipated only one cut due to concerns about persistent inflation.

Despite the Fed’s decision to leave interest rates unchanged last week, its communication hinted at potential future reductions in borrowing costs. However, the central bank emphasized the need to gain “greater confidence” in sustained inflation decline before implementing any cuts, underscoring its cautious approach.

Market sentiment remains sensitive to developments in the rates market, inflation trends, and Fed policy adjustments. These factors, coupled with the ongoing earnings season, are driving investor sentiment and market trends.

Short-Term Forecast

Looking ahead, market participants are closely monitoring economic indicators such as weekly jobless claims and U.S. consumer sentiment data for May. These releases will provide further insights into the health of the economy and the potential direction of monetary policy.

Additionally, the impact of the jobs report on bond yields is being closely watched. Changes in yields reflect investors’ expectations regarding future interest rates and can influence stock market performance.

While the energy sector led gains on Monday, individual stock movements varied. Paramount Global saw an uptick after ending negotiations with Skydance Media, while Perficient experienced significant growth following a private equity firm’s announcement of its acquisition.

In summary, Wall Street’s rally reflects growing optimism surrounding potential Fed rate cuts, with investors closely monitoring economic indicators and corporate earnings for further market direction.

Technical Analysis

E-mini S&P 500 Index futures are trading higher shortly before the mid-session on Monday. The short-term trend is up. It changed on Friday, shifting momentum to the upside.

The move also put the index in a position to challenge the 50-day moving average at 5183.76. Look for sellers on the first test of this level, but don’t be surpised by an acceleration to the upside since taking it out will change the intermediate trend to up. If this creates enough upside momentum then look for a near-term test of the record high at 5333.50.