Wall Street stocks climbed Wednesday on rising expectations for Federal Reserve interest rate cuts following an up day on European equity bourses and a down day in Asia.
Futures markets continued to bet on a September interest rate cut following Fed meeting minutes in which a “vast majority” of policy makers expressed support for an interest rate cut if economic data plays out as expected.
The Fed minutes were “dovish and though they’re dated, they suggest the debate is not whether the central bank cuts interest rate at its upcoming September meeting but rather how aggressive the initial phase of this normalization cycle should be,” said a note from Oxford Economics.
Analysts have cited a weakening jobs market as a driver of likely Fed rate cuts, although there are still hopes for a so-called “soft landing” that averts a US recession.
Labor Department figures released Wednesday showed US employers added around 68,000 fewer jobs monthly in the 12-month period through March 2024 compared with earlier estimates.
Compared with Tuesday, futures markets now see a slightly greater chance of a .50 percentage point cut, although more investors still expect the smaller 0.25 point cut.
“After a wild ride in the last three weeks that had little basis in fundamentals, markets have settled on predicting a first 25 bp (basis point) Fed rate cut at its 18 September meeting,” said Holger Schmieding, chief economist at Berenberg bank.
But Stephen Innes, managing partner from SPI Asset Management, warned that “it wouldn’t take much more than a bump in the unemployment rate to shove the market right back into 50bps territory.”
Other central banks, including the European Central Bank and Bank of England, have already started to reduce borrowing costs.
Markets are looking ahead to an address Friday by US Federal Reserve chief Jerome Powell at an annual gathering of central bank chiefs in Jackson Hole, Wyoming, on Friday.
Elsewhere, US oil prices hit a six-month low during the session, with analysts pointing to weak Chinese demand and expectations for higher production from OPEC+ exporters.
Among individual companies, Ford climbed 1.6 percent despite announcing $1.9 billion in costs connected to shifts in its electric vehicle strategy.
The automaker scuttled plans for one new EV model and pushed back the timeframe on a second vehicle in light of a slower-than-expected transition to EVs in North America.
JD.com, the Chinese online retail company, fell 4.2 percent after disclosing that Walmart divested its shares in the company. Walmart rose 0.9 percent.
– Key figures around 2030 GMT –
New York – Dow: UP 0.1 percent at 40,890.49 (close)
New York – S&P 500: UP 0.4 percent at 5,620.85 (close)
New York – Nasdaq Composite: UP 0.6 percent at 17,918.99 (close)
London – FTSE 100: UP 0.1 percent at 8,283.43 (close)
Paris – CAC 40: UP 0.5 percent at 7,524.72 (close)
Frankfurt – DAX: UP 0.5 percent at 18,448,95 (close)
Tokyo – Nikkei 225: DOWN 0.3 percent at 37,951.80 (close)
Hong Kong – Hang Seng Index: DOWN 0.7 percent at 17,391.01 (close)
Shanghai – Composite: DOWN 0.4 percent at 2,856.58 (close)
Dollar/yen: DOWN at 145.22 yen from 145.26 yen on Tuesday
Euro/dollar: UP at $1.1151 from $1.1030
Pound/dollar: UP at $1.3087 from $1.3034
Euro/pound: DOWN at 85.18 pence from 85.39 pence
West Texas Intermediate: DOWN 1.7 percent at $71.93 per barrel
Brent North Sea Crude: DOWN 1.5 percent at $76.06 per barrel
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