S&P 500, Nasdaq Down Today As FED’s Waller Calls for Rate Cuts

The major US market indices, such as S&P 500 are lower today after being bullish and setting new record highs earlier this week, led by the NASDAQ. The NASDAQ index was down more than 1.6% at the start of the US session, and has been declining since. The S&P is also down, with US chip makers significantly contributing to the decline in major indices. Fed Governor Waller, who was scheduled to speak at 9:35 AM ET, made dovish remarks, suggesting that rate cuts are likely. This is generally positive news for the stock market, as it implies a shift of money from Treasuries into stocks due to lower income from rates.

S&P 500 Chart H4 – Will the 20 SMA Hold As Support Again?

Currently, the NASDAQ is down 435 points, or -2.40%, at 18,068.83, continuing its downward trend as I write. It appears the NASDAQ is on track for its worst day of 2024, with a notable previous drop of -2.45% on October 25. The S&P 500 is also declining, now at 5,600 points, down 67 points or -1.20%. Here’s the current market snapshot:

Highlights From Gov. Waller Speaking

Fed Governor Waller discussed the scenarios that could lead to a rate cut, emphasizing that the time for such a move is approaching. He outlined three potential outcomes:

  1. Optimistic Scenario: Continued positive inflation and economic data could prompt a rate cut in the near future.
  2. Likely Scenario: Uneven inflation data showing progress might make a rate cut less certain in the short term.
  3. Low Probability Scenario: A significant resurgence in inflation in the second half of the year, which is unlikely.

Waller indicated that the US central bank is nearing the point where a cut in policy rates could be justified. Current data suggests a soft landing with minimal trade-offs in terms of unemployment, and recent inflation data has bolstered his confidence that the Fed will meet its inflation targets.

However, he noted that more evidence is needed from monthly personal consumption expenditures inflation (PCE) to confirm sustained improvements. Moderate consumption growth may continue into the second half of the year due to resilient personal income data.

The labor market has achieved a rough balance between supply and demand, but there are now more upside risks to unemployment than seen in a long time. Wage growth has slowed and is now consistent with supporting a 2% inflation rate sustainably.

Waller stressed that the exact timing of a rate cut is not crucial, but it is important to ease when conditions warrant it. He also highlighted that the labor market is in a favorable position, with firms having the workers they need, and it is essential for the Fed to maintain these conditions. He concluded by saying that while the high rates have served their purpose, the timing of the cut remains an open question.

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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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