Stocks rose and bond yields fell as recent economic data raised hopes that the Federal Reserve could cut interest rates in September. All S&P 500 sectors posted gains, boosted by anticipation that the Federal Reserve’s easing policy could improve prospects for U.S. companies. This optimism especially benefited smaller companies, which outperformed large technology companies and extended their July rally to 10%.
Economic data and consumer sentiment
Recent reports supported the expectation of a rate cut. The personal consumption expenditure (PCE) price index, which excludes food and energy, showed a modest increase in June, while consumer spending remained strong. However, consumer confidence in the US fell to its lowest level in eight months in July as high prices hit personal finances.
Market reactions and analyst opinions
The S&P 500 rose 1%, the Russell 2000 index rose 2% and a Bloomberg index tracking top technology companies added 0.7%. 10-year Treasury yields fell four basis points to 4.2%. Analysts, such as Tim McDonough of Key Wealth, suggest that the Federal Reserve could pave the way for a rate cut in September based on current data. E*Trade’s Chris Larkin mentioned that while the economy and inflation are stable, a rate cut is unlikely next week.
Investor sentiment and corporate news
Investor sentiment is positive and focused on upcoming earnings rather than inflation or interest rates. TradeStation’s David Russell noted that the PCE data indicates a decline in inflation, allowing investors to focus on profits. However, Bank of America’s Michael Hartnett warned that a continued economic slowdown could lead to a shift away from high-yield technology stocks.
Featured corporate developments
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3M Co. raised its profit forecast, showing progress under its new CEO.
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McDonald’s new $5 meal deal boosted visitation to the United States and attracted more budget-conscious diners.
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Bristol Myers Squibb Co. raised its 2024 profit forecast due to strong demand for new drugs.
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Apollo Global Management Inc. agreed to buy the gaming division of International Game Technology Plc and Everi Holdings Inc. for $6.3 billion.
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Apple Inc. lost market share in China to local competitors such as Huawei Technologies Co.
Market movements
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The S&P 500, Nasdaq 100 and Dow Jones Industrial Average each rose about 1%.
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The Stoxx Europe 600 rose 0.8% and the MSCI World index rose 0.9%.
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Bitcoin rose 4.1% to $67,928.32 and Ether rose 3.1% to $3,250.1.
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The 10-year Treasury yield fell to 4.20%, while German and British 10-year yields also saw slight declines.
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West Texas Intermediate crude fell 1.4% to $77.21 a barrel, and spot gold rose 0.8% to $2,384.50 an ounce.
Recent economic data and market activity suggest a possible shift in monetary policy from the Federal Reserve, as investors remain hopeful of a rate cut in September.
Also read: Global stock markets fall after Wall Street tech sell-off