(Bloomberg) — Wall Street kicked off the week with gains as traders see a Federal Reserve cut on Wednesday as a sure thing, while awaiting validation from officials on bets for a series of reductions extending into next year.
Equities resumed their record-breaking run, with the S&P 500 topping 6,600. Tesla Inc. soared 5% as Elon Musk bought $1 billion worth of shares. Alphabet Inc. hit $3 trillion. Tariff hopes also aided sentiment, with President Donald Trump saying he’d speak Friday with Chinese leader Xi Jinping, following negotiations that resulted in a framework to keep ByteDance Ltd.’s TikTok app running in the US.
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Treasuries rose, with two-year yields hovering near the lowest since last September. The dollar fell. Money markets are pricing in a quarter-point Fed cut this month, and nearly two more by year-end.
The first US rate reduction since Donald Trump became president again is likely to seize the spotlight in a week that will determine policy settings for half of the world’s 10 most-traded currencies.
Recent signs of weakening in the labor market, paired with no surprises in the latest inflation data, sealed the deal for what most economists expect will be a quarter-point Fed cut. The pace of easing after that is now the big question, with prices stubbornly above the central bank’s target.
“Now the discussion will turn to how aggressively the Fed will act, and the market may take its near-term cues from Chairman Jerome Powell’s press conference,” said Chris Larkin at E*Trade from Morgan Stanley. “The Fed may remind everyone that it may be focused on jobs now, but it hasn’t forgotten about the other half of its mandate.”
Officials on Wednesday will also release their quarterly update of economic and rate forecasts — known as the dot plot — and Powell will hold his regular post-decision press conference. In June, Fed officials were narrowly in favor of two quarter-point cuts in 2025.
What traders will really hang on is the tone of Powell’s press conference and the “dot plot” projections, according to Fawad Razaqzada at City Index and Forex.com.
“Personally, I’ll be watching how the market reacts to any mention of inflation being ‘well anchored’ or the labor market ‘cooling more than expected,” he said. “That sort of language would be music to the ears of dollar bears. On the flip side, a cautious Fed that hints at a ‘wait and see’ approach might stall the rally, at least temporarily.”
Before that, Razaqzada noted that there’s also a bit of data to keep things lively before and after the decision. Tuesday’s retail sales could either reinforce the soft-landing narrative or raise fresh concerns about consumer demand, he said. And Thursday’s jobless claims will add another piece to the puzzle.
In a nod to data that suggests that US-based firms are growing reluctant to hire, the Fed will cut by 25 basis points this week, according to Thierry Wizman at Macquarie Group. But to the central bank’s hawks, monetary policy doesn’t present as being tight, he noted
“And so Jay Powell will offer balance. He’ll highlight again the downside risk to employment growth, but refrain from signaling a (long) string of cuts after September,” Wizman said.
Lon Erickson at Thornburg Investment Management says he doesn’t think we’re ready for another 50 basis-point cut this year like the Fed did when the cutting process first began.
“Considering what we’ve seen with inflation, which came in a bit higher than expected, they’ll continue to be cautious,” he said. “The wild card remains inflation. We’ve seen signs of relief in goods prices and stickiness in services as well. The key question is how that plays out over the rest of the year and whether we end up in the dreaded stagflation-type environment, which would put the Fed in a tough spot.”
Erickson says he’s leaning more towards expecting a rate cut at each of the remaining meetings this year amid a softening labor market.
Corporate Highlights:
China ruled that Nvidia Corp. violated anti-monopoly laws with a high-profile 2020 deal, ratcheting up the pressure on Washington during sensitive trade negotiations. CoreWeave Inc. said its shareholder Nvidia Corp. will buy cloud services with an initial value of $6.3 billion. Alaska Air Group Inc.’s adjusted third-quarter profit will be at the low end of the carrier’s previous estimate of $1 to $1.40 a share, driven down by a July technology outage and rising fuel prices. Robinhood Markets Inc. is launching a closed-end fund to give US retail investors exposure to private companies. Orsted A/S will offer new shares at a heavy discount as the offshore wind developer pushes ahead with a $9.4 billion rights offering to shore up its finances after a bet on the US market went wrong. Some of the main moves in markets:
Stocks
The S&P 500 rose 0.5% as of 10:44 a.m. New York time The Nasdaq 100 rose 0.6% The Dow Jones Industrial Average rose 0.3% The Stoxx Europe 600 rose 0.5% The MSCI World Index rose 0.5% Bloomberg Magnificent 7 Total Return Index rose 1.8% The Russell 2000 Index rose 0.5% Tesla rose 5.5% Alphabet rose 3.8% Nvidia fell 1.5% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1754 The British pound rose 0.2% to $1.3588 The Japanese yen rose 0.2% to 147.44 per dollar Cryptocurrencies
Bitcoin fell 0.8% to $114,921.59 Ether fell 2% to $4,524.97 Bonds
The yield on 10-year Treasuries declined two basis points to 4.04% Germany’s 10-year yield declined one basis point to 2.70% Britain’s 10-year yield declined three basis points to 4.64% The yield on 30-year Treasuries declined two basis points to 4.66% The yield on 2-year Treasuries declined two basis points to 3.53% Commodities
West Texas Intermediate crude rose 1.2% to $63.44 a barrel Spot gold rose 0.5% to $3,660.81 an ounce ©2025 Bloomberg L.P.