US Stocks Drive Higher Ahead of Fed – Nasdaq up 0.8%
US stock markets hit record levels in trading again yesterday ahead of a highly anticipated rate cut later today and improving trade news between China and the US. The Dow pushed up 0.34% to 47,706, the S&P 0.23% to 6,890, and the Nasdaq jumped 0.80% to 23,827. FX and bond markets were more muted, the DXY drifting 0.05% lower to 98.73, while US 2-year yields added 0.8 of a basis point to move up to 3.490%, and the benchmark 10-year dropped just 0.4 of a basis point to 3.976%. Oil prices fell again as the market priced in production increases from OPEC+, Brent down 1.89% to $60.15, and WTI off 1.75% to $64.47 a barrel. Gold continued its recent drop, losing 0.75% on the day to close out the NY session at $3,951.11 an ounce.
FOMC Meeting in Focus for Traders Today
Traders are eagerly awaiting today’s key update from the Federal Reserve Bank later today, with the market now pricing in a 99.9% chance of a 25-basis point rate cut. Clearly, it would be a huge surprise to the market if this did not occur, and we would see massive moves across financial products. However, the likelihood is that we will see moves on the back of the FOMC statement and consequent press conference. The risk does seem to sit with a less dovish committee, with the market looking for another rate cut in December and more in 2026 following last week’s CPI data. The Fed has clearly been focusing on the failing jobs market, but it does have a dual mandate that includes inflation, and despite last week’s slightly lower print, CPI levels are still above where the Fed would like to see them in a rate-easing cycle. Any indications of hesitation for future cuts, from either the inflation risk or the fact that we are unlikely to have data next month, could see some sharp corrections in easing expectations and some big moves in the market, with the dollar and yields likely to jump and equity markets take a hit.
Huge Day Ahead for Markets
The macroeconomic calendar kicks into action today as some key data and central bank rate calls look set to lift volatility. Australian markets have already seen RBA rate-cut expectations pull back sharply after the CPI data came in well above expectations (3.5% y/y vs exp. 3.1% y/y). Focus will jump across the Tasman to New Zealand later in the day, with RBNZ Governor Christian Hawkseby scheduled to speak in Auckland. There is little scheduled in the European session; however, the New York day could see some huge moves. The initial focus will be north of the border in Ottawa, where the Bank of Canada is expected to deliver another 25-basis point rate cut as they continue to battle the falling jobs market. Focus will then shift firmly to US markets, with Pending Home Sales (exp. +1.6% m/m) and Weekly Crude Oil Inventory (exp. -0.9 mio barrels) due out before a few hours’ wait for the key interest rate update from the Federal Reserve Bank.
