Nasdaq, Stocks Higher As Powell Hints on A September FED Cut
We have seen a sizeable retreat in stock markets in recent weeks, but they surged higher today, with Nasdaq leading the way. Before the FOMC rate announcement scheduled for 6 PM GMT, major US market indices opened higher, signaling strong investor sentiment. Federal Reserve Chair Jerome Powell downplayed the APD employment and employment cost figures, which slightly missed estimates at 0.9% versus the expected 1.0%. This pointed to a softening in the US labor market.
Nasdaq Chart Daily – Bounces Off the 100 SMA on the Daily Chart
Despite weak earnings reports from the previous day and mixed results from Microsoft—which opened 1.5% down—the market reacted positively. The NASDAQ bounced off the 100 daily SMA (green) by over 500 points, rising by m0re than 3% to 17,668, surpassing both its 50-hour moving average retracement level of the previous decline at 17650. The S&P index also rebounded, climbing above its 100-hour moving average to 5,539.
Federal Reserve Hints at Possible September Rate Cut
During today’s meeting, the Federal Reserve maintained its current policy stance, but Powell hinted at a possible rate cut in September, suggesting that the economy might soon reach a point where lowering the policy rate would be appropriate. He emphasized a data-driven approach, indicating that future decisions will not be based solely on individual data points but on broader economic trends. This guidance has already influenced market pricing, with significant shifts in expectations for a September rate cut. The anticipation of policy easing reflects a growing consensus that the Fed may soon pivot to support economic growth amidst signs of a cooling labor market.
Key Comments from Fed Chair Powell
- Decision on September Rate Cut: No decision has been made about a rate cut in September, but there is a broad sense that we are moving closer to that possibility.
- Rate Reduction Possibility: A reduction in the policy rate could be considered as soon as the next meeting.
- Inflation Considerations: If inflation trends lower quickly or aligns with expectations, a rate cut could be possible in September. Conversely, if inflation proves more persistent, it will be considered alongside other factors.
- Balancing Risks: Decision-making will not hinge on a single factor but will involve assessing a balance of risks.
- Data-Driven Decisions: The Fed is looking for more positive economic data before making a decision.
- Rate Cut Expectations: There could be a range of rate cuts this year, from none to several, depending on economic conditions.
- Economic Outlook: The path ahead will depend heavily on the state of the economy.
- Labor Market: The labor market is showing signs of gradual normalization and is not seen as a likely source of inflationary pressure at present.
- Inflation Data: Current inflation data, at 2.5% over the past 12 months, is significantly better than a year ago, though seasonal factors are considered in these assessments.
Nasdaq Index Live Chart
[[Nasdaq-graph]]
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