S&P 500 Rockets to New High as Fed Confirms Rate Cuts Are Coming

For S&P 500 (Index: SPX) investors there was one, and only one, market moving headline during the week that was. The Federal Reserve confirmed on Wednesday, 20 March 2024 that interest rate cuts are coming in 2024.

That confirmation was like lighting off a rocket on Wall Street. The index rose nearly 0.9% after the Fed’s “dot-plot” projection of future interest rates was released on Wednesday afternoon, closing at an all-time record high. The index would proceed to reach its current new record high of 5,241.53 on the following day, but dipped slightly on Friday, 22 March 2024 to close out the week at 5,234.18. That value represents a 2.3% gain over its previous week’s close, making the third week of March 2024 the best of the year to date for the S&P 500.

The CME Group’s FedWatch Tool projects the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 12 June 2024 (2024-Q2), unchanged from last week. The expectation that the Fed will begin a series of quarter point rate cuts starting on that date and continuing at mostly twelve-week intervals is also unchanged from the previous week.

With the Fed’s first rate cut expected in June 2024, investors have locked their forward looking focus on the current quarter of 2024-Q2 in setting current day stock prices. The latest update shows that even though the trajectory of the index is just off its record high, it falls almost right in the middle of the redzone forecast range we added to the chart several weeks ago, which is based on the assumption investors would be focused on 2024-Q2 at this time.

Other things happened during the third week of March 2024. Here’s a summary of all the other market-moving news headlines that investors absorbed during the week, along with the week’s most influential headline.

Monday, 18 March 2024

• Signs and portents for the U.S. economy:

• Morning Bid: Rates, oil lifted by China’s green shoots

• Oil prices inch higher amid attacks on Russian energy facilities
• US aims to return emergency oil reserve to prior levels by year-end

US factory production rebounds from weather-induced slump

Fed minions expected to signal slower pace of anticipated interest rate cuts:

• Inflation frustration may prompt Fed to dial back rate-cut outlook

Some trouble continues, but “green shoots” developing in China:

• China’s upbeat industrial output, retail sales tempered by frail property
• China’s CNOOC discovers 100 million ton oilfield in Bohai Sea
• China’s property investment declines slow but sector still shaky

Who are these BOJ minions setting the stage to end never-ending stimulus?

• BOJ to call time on negative interest rates and end yield curve control – Nikkei

• Explainer: Who are the BOJ’s doves and hawks?

Japanese bank trains staff for a novel scenario: positive interest rates

Bigger trouble developing in the Eurozone:

• Europe’s start-ups turn to increasingly complex debt deals as cash dries up

Nasdaq, S&P, and Dow rallied higher as focus shifts to the FOMC meeting

Tuesday, 19 March 2024

• Signs and portents for the U.S. economy:

• Crude oil hits new five-month highs but Citi sees possible drop to $55 by late 2025

• Oil rises to multi-month highs on Russian supply concerns

US single-family housing starts soar in February

BOJ minions finally end never-ending stimulus:

• Bank of Japan scraps radical policy, makes first rate hike in 17 years

• Japanese business groups welcome BOJ’s first rate hike in 17 years

BOJ cuts maximum limit of JGB purchase amount after major policy shift

Nasdaq, Dow gain after BoJ’s historic pivot, S&P notches new record close; all eyes on Fed

• Wall Street advances with Nvidia and Fed meeting in focus

• Nvidia stock climbs as CFO says new chip to ship in 2024

Wall Street bonuses fell 2% for 2023, New York Comptroller says

Wednesday, 20 March 2024

• Signs and portents for the U.S. economy:

• Oil slips as investors weigh Fed rate decision
• US retail sales to rise at a slower pace in 2024, says NRF

Fed minions confirm interest rate cuts, looser monetary policy lie ahead:

• Fed sees three rate cuts in 2024 but a more shallow easing path

• Instant view: Fed stands pat on rates and view on 2024 cuts, in face of elevated inflation
• Fed policymakers stick to three-rate-cut view in ’24, but barely
• Amid forecast shift, Fed’s Powell flags uncertainty over longer-run outlook

Fed’s Powell says balance sheet drawdown taper coming soon

China central bank doesn’t change rates, does change staff:

• China leaves benchmark lending rates unchanged, as expected

• China’s central bank reshuffles monetary policy committee

BOJ minions’ plan to exit never-ending stimulus not going as well as hoped:

• How the BOJ’s plan for a smooth exit from negative rates unraveled

• Era of negative interest rates unlikely to be revisited soon

ECB minions going to cut rates, uncertain about what they do next:

• ECB cannot commit to rate path even after first cut, Lagarde says

S&P, Dow close at new record highs, Nasdaq rises +1% after Fed’s optimism on rate cuts

• Wall St ends higher as Fed keeps three rate cuts on the horizon

Thursday, 21 March 2024

• Signs and portents for the U.S. economy:

• Oil settles lower on weaker US gasoline demand, Gaza ceasefire hopes
• US Treasury key yield curve inversion becomes the longest on record
• US existing home sales rise to one-year high in February
• US new vehicles sales set to rise in March, report shows

Fed minions expected to start delivering rate cuts in June 2024:

• Most brokerages stick by forecast of Fed rate cuts starting in June

Bigger stimulus developing in China:

• China central bank has room to cut bank reserves ratio further, deputy governor says

BOJ minions see positive growth signs in Japan, plan end to bond buying next:

• Japan’s factory activity declines slow, service sector picks up
• BOJ’s Ueda eyes future drop in bond buying in sign of steady exit

Central banks start pivoting to interest rate cutting mode after Fed greenlights cuts in 2024:

• The great central bank policy reversal kicks off
• Swiss central bank cuts rates in surprise move, getting ahead of global peers
• Bank of England sees economy ‘moving in right direction’ for rate cuts
• Norway keeps interest rate on hold, eyes September cut

Wall Street hits record closing highs on rate-cut optimism; chip sector rallies

Friday, 22 March 2024

• Signs and portents for the U.S. economy:

• Oil steady as Gaza ceasefire talks gain traction

Fed minions start trying to dial back rate cut expectations they unleashed:

• Fed’s Bostic scales back to single rate cut on the year, versus two previously
• Fed gets an earful about ‘stranglehold’ from high rates

Bigger bailout developing in China:

• China yuan falls to four-month low, state banks step in

S&P 500 ends near flat but index posts biggest weekly gain of year

• Nasdaq, S&P, Dow end mixed after record-breaking spree as Nike, Lululemon slide

• Nike and Lululemon rattle the athletic apparel sector with bombshell earnings reports

The Atlanta Fed’s GDPNow tool‘s latest estimate of real GDP growth for the first quarter of 2024 (2024-Q1) decreased to +2.1% after last week’s +2.3% growth projection.

Image credit: Microsoft Bing Image Creator. Prompt: “An editorial cartoon of a Federal Reserve official lighting a rocket with ‘RATE CUTS’ written on it and the Wall Street bull in the background.”