Stocks Soar While US Yields Fall: What Rising Fed Rate Cut Bets Mean for Investors

Global stocks are seeing a positive trend, fueled by growing optimism for a potential interest rate cut by the U.S. Federal Reserve in December. This shift in sentiment helps alleviate concerns about high valuations, especially in the AI sector.

Last week, the market faced its biggest drop since early August. Fear of a stalled economy and high valuation worries weighed heavily on investors. But mid-week, New York Fed President John Williams reassured markets that a rate cut could happen soon, leading to a rally. His views were backed by Fed Governor Christopher Waller, who noted the job market is fragile enough to support easing rates.

Sam Stovall from CFRA Research described Williams’ comments as a “cavalry” moment for investors, sparking renewed interest in equities. However, he cautioned that trading volumes are low, suggesting this might just be a temporary bump.

According to the CME’s FedWatch Tool, there is about a 79.1% chance of a 25 basis point cut in December, up from 42.4% just a week ago. Financial experts, including Jan Hatzius from Goldman Sachs, anticipate not just a December cut, but also another two cuts by mid-2026, targeting a funds rate of 3-3.25%.

In early trading, major U.S. stocks bounced back, with most sectors, particularly communications, experiencing gains. The Dow Jones rose by 277.75 points, while the S&P 500 and Nasdaq also saw significant increases. On the global front, European markets responded positively, buoyed by expectations of interest rate cuts and potential peace talks between Ukraine and Russia.

Investors are also keeping an eye on U.S. retail sales and producer price data as the government reopens after a shutdown. Meanwhile, the Japanese yen is under scrutiny as it continues to weaken, prompting discussions of possible government intervention. Takuji Aida, an advisor to Prime Minister Sanae Takaichi, stated that Japan could take steps to stabilize its currency amidst economic pressures.

Oil prices reacted to these developments, with crude rising due to the potential for a U.S. interest rate cut outweighing concerns about peace in Ukraine. U.S. crude prices increased by 1.29% to $58.81 per barrel.

As traders navigate this landscape, they remain vigilant about economic indicators and geopolitical developments that could impact market trends.

Source link

TOPIC:MARKETS-COMMODITIES-ENERGY,MKTREP,MTPIX,REP,CEN,COM,CRU,DBT,ECO,ENR,FRX,GOL,GVD,INT,MCE,METL,NEWS1,NRG,PREMTL,STX,WEU,EASIA,KR,AMERS,US,EUROP,SG,HK,AU,ASEAN,TW,NAMER,SEASIA,EMEA,ASXPAC,EMRG,AUNZ,CN,ASIA,JP,DEST:AUF,DEST:CSA,DEST:SNI,DEST:SI,DEST:LBY,DEST:REULB,DEST:ABX,DEST:G,DEST:RAST,DEST:FNE,DEST:SOF,DEST:J,DEST:M,DEST:PGE,DEST:GNN,DEST:Z,DEST:PTD,DEST:RNP,DEST:E,DEST:C,DEST:ABN,DEST:AFA,DEST:BNX,DEST:GRO,DEST:PSC,DEST:FMW,DEST:U,DEST:O,DEST:DNP,DEST:MTL,DEST:FUN,DEST:UCDPTEST,DEST:RWSA,DEST:GNS,DEST:RWS,DEST:D,DEST:RBN,DEST:OIL,FIN,MKTS/GLOB,DEST:OUKBSM,DEST:OUSBSM,DEST:OCABSM,DEST:SEABS,DEST:NOINBSM,DEST:OZABSM,DEST:ORTAO,DEST:OUSTPM,DEST:OCATPM,DEST:OUKTPM,PACKAGE:US-TOP-NEWS,PLCY,BISV,BNK,BNKS,BNKS1,BSVC,CMPNY,FINS,PUBL,MY,DEST:UKI,MTGFX,EU,GEN,INTAG,POL,CEEU,EZC,DE,DEST:ZZ,DEST:ZD