S&P 500 Rises as Hot Jobs Report Pushes Back Expected Rate Cuts

The S&P 500 turned in a solid performance during the trading week ending Friday, 7 June 2024. The index closed up by 1.53 over its previous week’s close and even recorded a new record high of 5,354.03 in the middle of the week. It slipped just a bit from that level to close the week at 5,346.99.

The prospects for rate cuts dominated the week’s marking-moving headlines. The European Central Bank pulled the trigger on implementing a new series of rate cuts in a move aimed at boosting a weak Eurozone economy, while an unexpectedly “hot” jobs report pushed back the expected timing for when the Federal Reserve will follow suit in the U.S.

The CME Group’s FedWatch Tool now projects Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 7 November (2024-Q4), 12 weeks later than expected a week earlier. The tool anticipates the Fed will start a series of 0.25% rate cuts on that date that will occur at 12 week intervals well into 2025.

The latest update of the dividend futures-based model‘s alternative futures chart shows the S&P 500′s trajectory most closely pacing the projection associated with investors focusing their forward-looking attention on 2024-Q4. Which not coincidentally, is the quarter in which the Fed is expected to start a series of rate cuts.

The curious thing is investors shifted their attention to 2024-Q4 a week earlier, ahead of the news that moved the FedWatch Tool’s projections this week. Speaking of which, here are the past week’s headlines:

Monday, 3 June 2024

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

• Oil hits four-month low as OPEC+ decision fails to allay demand worries

• OPEC+ extends deep oil production cuts into 2025

US factory activity, construction spending both fall

Economic growth signs developing in China:

• China’s factory activity growth hits 2-year high, Caixin PMI shows

BOJ minions see growth signs in Japan:

• Japan’s May factory activity expands for first time in a year, PMI shows

Growth signs developing in the Eurozone:

• Euro zone manufacturing sees potential signs of recovery in May

Wall Street stocks fall weighed by soft manufacturing data, NYSE glitches

• NYSE glitch sparks volatility in dozens of stocks

Tuesday, 4 June 2024

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

• Oil drops more than $1 as OPEC+ decision spotlights shaky demand
• US job openings drop in April, as labor market normalizes

Bigger trouble, stimulus developing in China:

• China sees property silver lining but can’t shake Japan comparisons
• Explainer: Key features of China’s affordable housing policy

BOJ minions say they’re going to pay attention to yen:

• BOJ must be vigilant to yen’s impact on economy, says deputy governor Himino

ECB minions thinking about things other than rate cuts and inflation:

• ECB ready to force banks to tackle climate risk, Buch says

Wall Street stocks end slightly higher as weak jobs data supports rate cut

Wednesday, 5 June 2024

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

• Oil rises 1% as Fed rate cut optimism offsets demand fears
• US services sector activity rebounds while private payrolls growth slows
• US private payroll growth slows to 4-month low; small firms cut jobs

Fed minions expected to deliver two rate cuts in 2024:

• Fed to cut rates twice this year, starting September – Reuters poll

Some positive economic developing in China:

• China’s robust services activity drives up employment, Caixin PMI shows

BOJ minions looking at numbers that say inflation is lurking in Japan:

• Japan’s service activity extends gains, price pressures persist, PMI shows

Economic growth signs in the Eurozone, slow growth signs in Australia:

• Euro zone business activity expands at fastest rate in a year
• Australia economy slows to a crawl in Q1, grows 0.1% q/q

S&P 500, Nasdaq close at record highs as data supports Fed easing

• Nvidia overtakes Apple as No. 2 most valuable company

Thursday, 6 June 2024

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

• Oil settles higher on hopes Fed will track European Central Bank rate cuts
• US trade deficit widens in April
• Small business may show a coming US hiring slowdown

BOJ minions planning to dial back Japan’s QE:

• BOJ chief Ueda reaffirms resolve to trim bond buying

ECB minions cut Eurozone interest rates, having second thoughts but planning for next one:

• ECB cuts rates, keeps next move under wraps
• Some ECB hawks regret premature rate cut commitment, sources say

• ECB sees higher growth, inflation

ECB governors see July rate cut as unlikely, focus now on Sept -sources

Dow, S&P, and Nasdaq ended mixed in a mostly muted trading day

Friday, 7 June 2024

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

• Oil edges higher on OPEC+ reassurances but set for third weekly loss

• U.S. oil and gas rig count dips to lowest since January 2022, Baker Hughes says

US adds far more jobs than expected in May

Media recaps things Fed minions were saying before pre-FOMC communications blackout, delay in rates cuts expected after jobs report:

• Fed hawks and doves: what they are saying on monetary policy
• Fed seen waiting to cut rates as job growth picks up

Mixed economic signs developing in China:

• China’s exports rise solidly, but slower imports temper outlook

ECB minions thinking they might need to worry about inflation:

• ECB policymakers warn about inflation challenge

Nasdaq, S&P, and Dow finished lower while yields jumped

• ‘AI Big Ten’ dominance on display in S&P 500 as Nvidia heads into stock split
• Nvidia 10-1 stock split becomes official

The Atlanta Fed’s GDPNow tool‘s forecast of annualized real GDP growth rate during 2024-Q2 rose to +3.1% from the +2.7% growth anticipated just a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon in the style of Charles Schulz featuring Charlie Brown trying to kick a football while Lucy pulls it away”. We added the text to create the parody of the Fed pulling away the rate cut football from U.S. markets and tweaked parts of the image to address some of the more peculiar AI-generated artifacts.