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Wall St rises after Fed policymakers back rate cuts

Writer's picture: The San Juan Daily StarThe San Juan Daily Star

Wall Street’s main indexes rose in mid-afternoon on Monday as investors assessed whether a trend will develop in the week following the Federal Reserve’s rate cut.


The gains come amid comments from Fed policymakers and steady factory activity data, building on last week’s sharp market rally after the central bank’s decision to lower interest rates.


The Fed’s pivotal move last week lifted major indexes to monthly gains, defying the historical trend of September as a weak month for equities.


Global stock indexes edged higher on Monday as investors digested comments from Federal Reserve policymakers while the euro fell against the dollar as business activity readings of the euro zone economy disappointed.


U.S. Treasury yields rose as bond investors continued to price out near-term recession in the world’s largest economy.


U.S. policymakers’ comments were in focus after the Fed last week began an easing policy with a half-point interest rate cut.


Minneapolis Fed President Neel Kashkari called the cut the “right decision” while Bank of Chicago President Austan Goolsbee said he expected “many more rate cuts over the next year.”


Atlanta Federal Reserve President Raphael Bostic said the U.S. economy is close to normal rates of inflation and unemployment and the Fed needs monetary policy to “normalize” as well.


The U.S. rate futures market has priced in 51% chance of a smaller 25-bp cut at the November Fed meeting, with a 49% probability of the bigger 50-bp easing, according to LSEG data. For the rest of the year, the futures market is implying cuts of around 77 bps.


The Dow Jones Industrial Average rose 59.96 points, or 0.14%, to 42,123.32, the S&P 500 rose 18.65 points, or 0.33%, to 5,721.20 and the Nasdaq Composite rose 49.35 points, or 0.28%, to 17,998.05.


U.S. stocks registered gains last week.


“It’s a little bit of a pause considering the exuberance of last week. There’s nothing economic right now that’s spooking the market other than the Fed going a little further than anyone expected,” said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.


MSCI’s gauge of stocks across the globe rose 2.75 points, or 0.33%, to 840.12. The STOXX 600 index rose 0.36%.


Comments from a number of policymakers were the main focus on Monday as investors searched for clues on why the central bank kicked off its easing cycle with an outsized 50 basis-point cut.


Fed officials including Raphael Bostic, Neel Kashkari and Austan Goolsbee supported the central bank’s last rate cut and voiced support for more cuts in the rest of the year.


Trader bets, as per the CME Group’s FedWatch tool, initially favored a larger Fed move at its upcoming November meeting, after Governor Christopher Waller on Friday flagged that upcoming inflation data could undershoot the Fed’s 2% target.


However, the bets have swayed since then and now appear to be a coin-toss, with markets expecting a total reduction of 74 basis points by year-end, according to LSEG data.


On the data front, U.S. business activity remained steady in September, while average prices for goods and services increased at the fastest pace in six months, potentially signalling a rise in inflation in the months ahead.


“I think investors are still just sort of taking a wait-and-see attitude, if indeed a soft landing is the most likely outcome.” said Sam Stovall, chief investment strategist of CFRA Research in New York.


At 2:52 p.m. EDT the Dow Jones Industrial Average rose 54.15 points, or 0.13%, to 42,117.51, the S&P 500 gained 13.21 points, or 0.23%, to 5,715.76 and the Nasdaq Composite gained 30.50 points, or 0.17%, to 17,978.54.


Eight of the 11 S&P 500 sectors were higher. Consumer discretionary stocks led gains with a 1.15%rise, while healthcare stocks declined 0.19%. Having rallied for much of the year, the S&P 500 is a whisker away from an all-time high and the blue-chip Dow hit another intraday record high.


Among rate-sensitive growth stocks, Tesla jumped 4.59%, while Meta Platforms rose 0.65% after Citigroup lifted its price target on the stock.


The Russell 2000 index, tracking small caps, was off 0.23%.


All eyes are on Friday’s personal consumption expenditure figure for August - the Fed’s preferred inflation gauge. Analysts indicate this release will be the week’s most significant catalyst.


Among top movers, Intel rose 3.41% after a report showed Apollo offered to make an investment of as much as $5 billion in the chipmaker. General Motors slipped 2.31% after Bernstein downgraded the carmaker’s stock to “market perform” from “outperform.”


Advancing issues outnumbered decliners by a 1.49-to-1 ratio on the NYSE. There were 427 new highs and 33 new lows on the NYSE.


The S&P 500 posted 59 new 52-week highs and one new low while the Nasdaq Composite recorded 74 new highs and 114 new lows.

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