The US benchmark equity indexes experienced an upward trend on Wednesday, as the minutes from the Federal Reserve's July monetary policy meeting indicated a strong likelihood of an interest rate cut in September. This news buoyed investor sentiment, leading to significant gains across major indices. The Nasdaq Composite, known for its technology-heavy composition, rose by 0.6% to reach 17,919.
Meanwhile, the S&P 500, which represents a broader segment of the US economy, advanced by 0.4%, closing at 5,620.9. The Dow Jones Industrial Average, albeit with a more modest gain, added 0.1% to finish at 40,890.5. Notably, the consumer discretionary and materials sectors led the way in gains, contrasting the decline seen in financials and energy. Minutes from the Federal Open Market Committee's meeting held on July 30-31 revealed that a vast majority of policymakers believe that easing monetary policy in September would be appropriate if upcoming data aligns with their expectations.
According to the minutes, 'Participants viewed the incoming data as enhancing their confidence that inflation was moving toward the committee's objective.' At this meeting, the FOMC decided to maintain the benchmark lending rate steady, ranging from 5.25% to 5.50%, marking the eighth consecutive pause on interest rate adjustments. In terms of bond yields, the US two-year yield saw a decrease of 6.1 basis points, settling at 3.94% on Wednesday, while the 10-year rate experienced a minor drop of 1.7 basis points to 3.80%. In a notable revision of economic data, it has been estimated that the US economy created approximately 818,000 fewer jobs from the previous year through March than initially reported, according to the preliminary revisions from the Bureau of Labor Statistics (BLS) regarding its annual nonfarm payrolls.
ING reported that the latest July jobs data—characterized by weak payroll growth, rising unemployment, decreased hours worked, and cooling wages—will only intensify the pressure on the Federal Reserve to adopt a more accommodative monetary policy stance. The financial institution stated, 'Momentum is being lost from an even weaker position than originally thought.' The possibility of a 25-basis-point interest rate cut next month fell to 62% on Wednesday, down from 71% the previous day.
Conversely, the likelihood of a more aggressive 50-basis-point reduction increased to 38%, compared to 29% earlier in the week, as per the CME FedWatch tool. Market participants are preparing for Fed Chair Jerome Powell’s remarks on Friday during the annual economic symposium in Jackson Hole, Wyoming.
This two-day event will commence on Thursday and is anticipated to provide additional insights into the Fed's monetary policy plans moving forward. On the commodities front, West Texas Intermediate crude oil prices saw a decline of 1.9%, settling at $71.81 a barrel. Recent government data indicated a larger-than-expected reduction in commercial crude stockpiles in the US in the past week. Saxo Bank noted in a report that 'The crude oil market sentiment remains under pressure as China's economic slowdown and the rapid adoption of electric vehicles and hybrid cars reduce fuel demand, leading to lower refinery runs and diminished oil demand.' In corporate news, Keysight Technologies ($KEYS) experienced a robust jump of 14%, marking the most significant increase on the S&P 500.
The electronics test and measurement equipment manufacturer reported fiscal Q3 results that exceeded expectations and CEO Satish Dhanasekaran expressed optimism regarding H2 orders surpassing the previous six-month performance. Target ($TGT) also saw its shares rise by 11%, earning the second-largest gain within the S&P 500, following the retailer's decision to raise its full-year earnings outlook based on positive trends across discretionary categories.
The results for fiscal Q2 surpassed market estimates. In contrast, American Express ($AXP) faced a decline of 2.7%, the steepest drop on the Dow and the second-largest on the S&P 500. Bank of America Securities downgraded the stock to neutral from buy, highlighting a 'limited incremental upside given potential for subdued billings volume growth and current premium valuation.' Gold prices remained relatively stable at $2,549.90 per troy ounce, while silver saw a marginal increase of 0.3%, closing at $29.60 per ounce..