- Wall Street is optimistic as markets anticipate a 0.25% Fed rate cut, saw investors encouraged by President Trump's discussions of a China agreement and robust advances in technology shares. The S&P 500 reached an all-time peak yesterday, despite most of its constituent stocks being unchanged or declining, suggesting that minor events could sway the market if Fed Chair Jerome Powell delivers unexpected comments during his address today.
The 96th anniversary of Black Monday, the 1929 event where the Dow Jones index dropped 13%, occurred yesterday. This marked the start of a tumultuous selling period that continued until the stock market had lost 89% of its worth the subsequent year, leading the U.S. Into the depths of the Great Depression.
TL;DR
- Markets anticipate a 0.25% Fed rate cut, with S&P 500 reaching an all-time peak.
- President Trump's discussions of a China agreement and tech share advances encouraged investors.
- Fed Chair Jerome Powell's address today will be closely watched for market-moving comments.
- Nvidia shares advanced significantly after CEO Jensen Huang downplayed AI bubble concerns.
Today, markets couldn’t look more different.
Futures in the S&P 500 were pointing up this morning, suggesting that investors are pretty happy with yesterday’s market close when the index gained 0.23% and set yet another record high. Traders seemed to be buoyed by President Trump’s suggestion that he was, finally, ready to do a deal with China and that he would be discussing Nvidia’s Blackwell chips as part of that deal.
Trading has largely paused today while investors anticipate U.S. Federal Reserve Chair Jerome Powell announcing an expected 0.25% reduction in interest rates, lowering them to the 3.75% range.
Powell had better deliver: 99.9% of bettors on Fed funds futures have priced in the cut already, according to CME FedWatch. This is “the Fed put,” according to Goldman Sachs.
“After the ‘Liberation Day’ selloff, markets shifted towards a Goldilocks regime based on less pessimistic growth expectations helped by a resilient corporate sector and more dovish Fed expectations due to a weak U.S. Labor market. However, since October the Goldilocks regime has been ‘tested,’” due to declining risk appetite, Christian Mueller-Glissmann and his team told clients this morning. “Earlier this month, markets shifted more towards a ‘central bank put’ regime.”
The Fed's announcement, Powell's address, and his responses during the subsequent Q&A session will be meticulously examined for his choice of words—and omissions—when discussing the state of the labor market and inflationary pressures.
Whatever he says will likely move the market.
That’s because it doesn’t take much to move the market, given how its value is concentrated among a handful of tech stocks with massive market caps. Nvidia, for instance, went up 4.98% after CEO Jensen Huang yesterday downplayed concerns about AI being a bubble, announced new deals with Uber, Palantir, CrowdStrike, and Nokia, and said the company was moving into quantum computing.
In fact, yesterday most stocks either fell or closed flat, according to Deutsche Bank. “There were only 104 advancers in the S&P 500, the fewest in over two weeks, and actually the fewest on an up day as far back as my data on advancers and decliners goes (to 1990). So remarkable,” Jim Reid and his team at Deutsche Bank told clients.
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
- S&P 500 futures are up 0.17% this morning. The last session closed up 0.23%.
- The STOXX Europe 600 was up 0.17% in early trading.
- The U.K.’s FTSE 100 was up 0.49% in early trading.
- Japan’s Nikkei 225 was up 2.17%.
- China’s CSI 300 was up 1.19%.
- The South Korea KOSPI was up 1.76%.
- India’s NIFTY 50 was up 0.45%.
- Bitcoin was at $113K.