U.S. benchmark equity indexes concluded the trading session on a high note Wednesday, fueled by insights from the Federal Reserve’s July monetary policy meeting suggesting a potential interest rate cut in September. The Nasdaq Composite climbed 0.6%, reaching 17,919, while the S&P 500 saw a 0.4% increase, closing at 5,620.9.
The Dow Jones Industrial Average recorded a modest gain of 0.1%, finishing at 40,890.5. The sectors driving these gains included consumer discretionary and materials, with financials being the only sector experiencing a decline, whereas energy remained relatively stable. According to the minutes from the Federal Open Market Committee's (FOMC) meeting on July 30-31, a "vast majority" of policymakers expressed that easing monetary policy in September would be appropriate if incoming data aligns with previous expectations.
The document stated, "Participants viewed the incoming data as enhancing their confidence that inflation was moving toward the committee’s objective." At this meeting, the FOMC maintained its benchmark lending rate steady at 5.25% to 5.50%, marking the eighth consecutive pause in rates. As investors digested this information, the yield on the two-year U.S.
Treasury note fell by 6.7 basis points to 3.93% on Wednesday, while the yield on the 10-year Treasury slid 1.7 basis points to 3.80%. In a noteworthy development, the U.S. economy is estimated to have created 818,000 fewer jobs in the year up to March than previously indicated, as per the Bureau of Labor Statistics' preliminary revisions to its annual nonfarm payrolls data.
With the recent July jobs report highlighting weak payrolls, rising unemployment, reduced hours worked, and cooling wages, analysts at ING reasoned that the latest BLS update would intensify pressure on the Fed to pursue an easier monetary policy. They commented, "Momentum is being lost from an even weaker position than originally thought." The outlook for a 25-basis-point interest-rate cut next month decreased to around 64% on Wednesday from 71% on Tuesday.
At the same time, the likelihood of a more aggressive 50-basis-point reduction increased from 29% to 36%, as indicated by the CME FedWatch tool. Investors are now keenly anticipating Fed Chair Jerome Powell's comments on Friday during the annual economic symposium in Jackson Hole, Wyoming, where further insights into the future monetary policy strategy are expected to be unveiled. In commodity markets, West Texas Intermediate crude oil saw a decline of 1.7%, settling at $71.96 a barrel.
Government data revealed that commercial crude inventories in the U.S. dropped more than anticipated last week. In corporate news, Keysight Technologies ($KEYS) emerged as the top performer on the S&P 500 with shares skyrocketing nearly 14%. The electronics test and measurement equipment manufacturer reported better-than-expected fiscal third-quarter results late Tuesday.
CEO Satish Dhanasekaran indicated that orders for the second half of the year are anticipated to exceed those of the prior six-month period. Following Keysight, Target ($TGT) also saw a significant surge, increasing 11% after raising its full-year earnings forecast in light of improving trends across various discretionary categories.
Target's second-quarter results exceeded market expectations. Conversely, American Express ($AXP) saw a dip of 2.7%, marking the steepest decline on the Dow and the second-worst in the S&P 500. Bank of America downgraded the stock from buy to neutral, citing a "limited incremental upside given potential for subdued billings volume growth and current premium valuation." In precious metals, gold experienced minimal fluctuation, priced at $2,549.90 per troy ounce, while silver rose slightly by 0.3% to $29.60 per ounce..