Stocks Climb as Traders Await Fed Decision: Markets Wrap
(Bloomberg) - US stocks extended a post-Election Day advance with traders expecting the Federal Reserve to cut interest rates later on Thursday.
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The S&P 500 rose 0.3%, after the index notched a record high in the previous session. Treasury yields dropped after Wednesday's historic selloff. The dollar fell further. Data earlier showed applications for US unemployment benefits ticked up last week.
Traders are turning their attention to the Fed, anticipating that the central bank will lower rates by a quarter-point on Thursday. Chair Jerome Powell's press conference later may provide clues on the Fed's path ahead, and it's likely he will face questions about what Donald Trump's returns to the White House will mean for economic growth and inflation.
"What would be interesting is not so much the cut, but communication around December and next year," James Vokins, portfolio manager at Aviva Investors, said in an interview. For Powell, "it will be a very difficult situation and it will be a very difficult communication to manage, he will have to be careful not to be too firm on any particular direction."
Traders have dialed back expectations for the Fed to lower interest rates over the next year on concern that Trump's policies will exacerbate inflation. Money markets are currently betting on about 1 percentage point of Fed cuts by September 2025, compared to 1.1 percentage points on Tuesday.
While stocks are posting more muted gains after Wednesday's surge, Evercore ISI strategists said the rally was nowhere near done. Trump's plans to slice through red tape could propel the S&P 500 another 11% through the middle of next year, they said.
History shows the bull market is "still an infant," ISI strategist Julian Emanuel wrote in a note. "This market will be driven higher by the policy prospect of deregulation in DC," he said, setting a price target for the index of 6,600 points by end-June 2025.
In the UK, the Bank of England lowered its key interest rate by 25 basis points to 4.75%. Governor Andrew Bailey said that borrowing costs are likely to fall "gradually from here" and that last week's UK budget will lift inflation by just under half a percentage point at its peak.
Czech policymakers also delivered an eighth consecutive interest-rate cut as weak economic growth eclipsed concerns about inflationary risks.
Key events this week:
Fed rate decision, Thursday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
The S&P 500 rose 0.3% as of 9:30 a.m. New York time
The Nasdaq 100 rose 0.6%
The Dow Jones Industrial Average rose 0.1%
The Stoxx Europe 600 rose 0.7%
The MSCI World Index rose 0.5%
The Bloomberg Dollar Spot Index fell 0.7%
The euro rose 0.6% to $1.0796
The British pound rose 0.8% to $1.2979
The Japanese yen rose 0.8% to 153.46 per dollar
Bitcoin fell 1.4% to $74,912.73
Ether rose 4.7% to $2,814.35
The yield on 10-year Treasuries declined four basis points to 4.39%
Germany's 10-year yield advanced four basis points to 2.44%
Britain's 10-year yield declined four basis points to 4.52%
West Texas Intermediate crude fell 1.1% to $70.89 a barrel
Spot gold rose 1.1% to $2,688.43 an ounce
This story was produced with the assistance of Bloomberg Automation.
-With assistance from Julien Ponthus, Cecile Gutscher and Margaryta Kirakosian.
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