Wall Street Traders Boost Stocks as Bond Yields Fall, Fueling Rate Cut Speculation

Wall Street traders sent stocks higher as bond yields fell after a series of weaker-than-expected economic reports, bolstering the case for the Federal Reserve to cut rates this year. In a shortened session ahead of the US holiday, the S&P 500 hit an all-time high on expectations that lower rates will continue to support Corporate America. Treasuries also climbed across the curve, while the dollar remained lower following the release of minutes from the June Fed policy meeting.

According to analysts, the Fed minutes may already be outdated given recent signs of an economic slowdown. Michael Feroli at JPMorgan Chase & Co. described the minutes as leaning dovish, with a consensus that disinflationary pressures are prevalent and the labor market is easing. Data leading up to Friday’s jobs report showed a contraction in the services sector and further cooling in the labor market.

“Bad news is good news,” said Fawad Razaqzada at City Index and Forex.com, referring to the market’s reaction to the latest US data releases. Investors are closely monitoring political developments, with Joe Biden facing pressure to abandon his reelection bid and Donald Trump gaining ground in post-debate polls.

The S&P 500 reached a new high, with Tesla Inc. leading gains in megacaps. Treasury yields dropped, and the dollar slipped as investors maintained a positive outlook despite growing concerns in the macroeconomic landscape. Analysts at Brown Brothers Harriman & Co. noted that a September Fed rate cut is likely if economic data support it.

Economists are anticipating a modest gain in June nonfarm payrolls, with the unemployment rate expected to hold steady. The upcoming jobs report is seen as crucial for the Fed’s decision-making on interest rates, as officials seek a rationale to signal a potential easing.

Fed Chair Jerome Powell emphasized the need for more evidence before lowering rates, citing the delicate balance between taming inflation and supporting the labor market. Market participants are closely watching the employment data, with varying expectations on the market reaction.

In corporate news, Novo Nordisk A/S’ diabetes drugs are under scrutiny for potential vision-related risks, while Paramount Global’s merger deal with Skydance Media was revived. Nvidia Corp. CEO Jensen Huang and Amazon.com Inc. founder Jeff Bezos made significant stock transactions, and Lyft Inc. announced fare increases for e-bike rentals in New York City.

Overall, the market remains optimistic despite the evolving economic landscape, with investors awaiting further clarity on the Fed’s monetary policy direction. The upcoming jobs report and other key events this week will likely shape market sentiment in the days ahead.