S&P 500 Rises as Expectations Firm for Rate Cuts Later in 2024

The S&P 500 (Index: SPX) rose a little over 1.8% largely as expectations the Federal Reserve will start a series of rate cuts in September 2023 firmed. The index closed out the trading week ending on Friday, 10 May 2024 at 5,222.68, just 0.6% below its 28 March 2024 record high.

Those expectations firmed despite the comments of Federal Reserve officials, whose pronouncements during the week were all over the map. Several see inflation running too high, prompting them to suggest they will continue to hold rates where they’re at. Some are worried enough about inflation they’re suggesting they would be okay with seeing economic growth slow and weaken. Others are saying they already see slowing growth, so they’re looking ahead to having to cut rates to stimulate the economy, although they’re unsure of their timing.

With that kind of shotgun spread from Fed officials about how they’ll be setting monetary policy during 2024, investors continued focusing on September 2023 as the likely timing for when the Fed will start cutting U.S. interest rates. The CME Group’s FedWatch Tool continued holding steady in anticipating the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3) for the fourth week in a row. For the second week in a row, the tool anticipates the Fed will start a series of 0.25% rate cuts on that date, which will proceed well into 2025 at 12-week intervals.

The latest update for the alternative futures chart shows the trajectory rejoining the dividend futures-based model‘s projections as expected, with investors focusing their foward-looking attention on 2024-Q3.

The market-moving headlines document the Fed officials’ various statements and provide more context for the information investors absorbed during the week that was.

Monday, 6 May 2024

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

• Oil climbs as Gaza tensions rise, Saudi Arabia hikes prices
• US banks report weaker loan demand, Fed survey says

Fed minions signal rate cuts are more likely than not, thinking a recession might help them end inflation:

• Fed’s Williams says next Fed move likely to be lower rates
• Fed’s Barkin: Ending inflation likely to require a hit to demand

Bigger trouble developing in China:

• China home sales slump 47% over May Day holiday vs 2023
• China’s services activity eases in April but still solid

ECB minions say they’re going to confidently cut Eurozone interest rates:

• ECB grows more confident about cutting rates, policymakers say
• ECB’s Simkus expects June rate cut to be followed by others

Nasdaq, S&P, and Dow ended higher as investors hope for rate cuts

• Wall Street closes higher for third session on rate cut optimism

Tuesday, 7 May 2024

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

• Oil settles lower on signs of easing supply tightness

Fed minions say they won’t hike rates, but maybe won’t cut them either:

• Fed may need to hold rates steady all year, Kashkari says
• Inflation “settling” high could pose new risks for the Fed, economy

BOJ minions see growth signs, threaten to intervene to prop up yen again:

• Japan’s service activity extends gains on solid demand, PMI shows
• Japan warns of action over rapid currency moves

ECB minions say they won’t be “lenient” with Eurozone inflation:

• ECB can’t be lenient with structural inflationary forces, Nagel says

S&P, Dow end slightly up, extend closing streaks despite Disney drag

• Analysts weigh Disney disappointment as stock drops 9.5% off mixed earnings

Wednesday, 8 May 2024

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

• Oil rises on U.S. crude storage draw, Fed rate cut hopes

Fed minions say they know how to measure market liquidity, think they might need a recession to contain inflation, say all is well:

• NY Fed’s Perli offers guideposts to measure market liquidity levels
• Fed’s Collins says economy may need to weaken to get 2% inflation
• Fed’s Cook says households, banks, firms largely in solid financial shape

BOJ minions keep threatening to do more interventions to prop up yen:

• BOJ’s Ueda signals chance of policy action if yen moves affect inflation

ECB minions gives green light to Eurozone interest rate cuts, wants to think about monetary policy:

• ECB can cut rates and should rethink how it sets policy, Wunsch says

Dow notches best daily win streak since December; S&P ends flat, while Nasdaq slips

Thursday, 9 May 2024

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

• US weekly jobless claims highest in more than eight months as labor market eases
• US 30-year fixed-rate mortgage falls to 7.09%, still too high to boost housing
• Oil edges up to one-week high on rising demand hopes after China, US data

Fed minions falling behind for cutting interest rates:

• Interest rates start to fall in Europe as the Fed lags

Growth signs, bigger stimulus developing in China:

• China’s exports and imports return to growth, signalling demand recovery
• China April crude oil imports rise 5.45% on previous year
• Two Chinese megacities lift home purchase curbs to attract buyers

BOJ minions saying they’re really going to hike rates if they have to fight inflation:

• BOJ’s board turned hawkish in April, steady rate hikes now in view
• Japan real wages fall in March, marking 2 years of decline

BOE planning rate cut in June 2024:

• Bank of England clears path for its first rate cut since 2020

Dow posts seven-day win streak, Nasdaq and S&P 500 also rise on rate cut bets

Friday, 10 May 2024

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

• Oil benchmark Brent above $84 on perky demand signals
• New Biden tariffs on China’s EVs, solar, medical supplies due Tuesday

• Exclusive: Biden to put tariffs on China medical supplies – sources

Fed minions think U.S. economic growth is sliding, wonder if U.S. interest rates are high enough to fight jump in inflation expectations:

• Fed’s Bostic says economy likely slowing, though rate-cut timing uncertain
• Fed officials mull whether rates high enough as inflation expectations jump
• US monetary policy may not be tight enough, Fed’s Logan says

Mixed growth signs developing in China:

• China’s car exports hit record high in April, as domestic sales fall
• China’s green aluminium ambitions hit by erratic rains, power cuts

BOJ minions see signs of recession in Japan, might use to avoid rate hikes:

• Japan economy expected to shrink in Q1 due to weak consumption: Reuters poll
• Japan’s consumer spending extends declines, clouding outlook for BOJ rate hikes

ECB minions gearing up for rate cut in June 2024:

• ECB set scene for June rate cut at last meeting, account shows

Nasdaq, S&P, Dow end solidly higher for the week as investors eye CPI data

• Wall Street closes up, another weekly gain ahead of inflation data
• Gold at more than two-week high on US rate-cut bets

The Atlanta Fed’s GDPNow tool is projecting an annualized real GDP growth rate of +4.2% in 2024-Q2, sharply up from the previous week’s forecast for 3.3% growth.

Image credit: Microsoft Bing Image Creator. Prompt: “An editorial cartoon of a Wall Street bull riding a bicycle looking backwards at a bear chasing him”.