Fed Interest Rate Cuts on the Horizon – Market Rally Continues with New S&P 500 Record

NEW YORK – Traders took a breather after a surge of optimism led to the S&P 500 reaching a new record amidst speculation about potential interest-rate cuts by the Federal Reserve and a slowdown in inflation. This was further fueled by a premarket uptick from Amazon.com Inc., Nvidia Corp., and Tesla Inc. However, the overall market remained relatively quiet, with minimal movement in S&P 500 and Nasdaq 100 futures, US Treasuries, and the dollar.

The upcoming consumer price index report on Tuesday will likely be a key factor in the market’s next moves. Economists surveyed by Bloomberg anticipate a drop in the annual US inflation rate to 2.9% in January from 3.4% the prior month, marking the first reading below 3% since March 2021. This potential disinflationary trend will heavily influence the scope and timing of any Federal Reserve rate cuts.

Pooja Sriram, US economist at Barclays, expressed confidence in the possibility of rate cuts, stating, “As long as we see this gradual progress down, they should be in a position where they can feel confident of wanting to cut.” She emphasized that the current elevated interest rates could potentially hamper economic growth, making a case for their gradual reduction.

The market’s expectation for rate cuts in 2024 has decreased, indicating more cautious optimism as opposed to over-exuberance. Iain Stealey, international chief investment officer for fixed income at J.P. Morgan Asset Management, highlighted the strength of employment, healthy purchasing managers’ surveys, and robust economic growth as key factors contributing to the market’s mixed sentiments.

The article then goes on to highlight key events and corporate developments for the upcoming week, as well as market movements in stocks, currencies, cryptocurrencies, bonds, and commodities. Notably, shares in Italian luxury brand Tod SpA rose significantly after the founding family announced a new attempt to take the company private, and PepsiCo saw gains after an upgrade to buy from neutral at Citi.

Overall, the article provides a comprehensive overview of the recent market performance and insights into the key factors influencing traders’ sentiments.