(Bloomberg) — Wall Street notched fresh highs amid bets that a Federal Reserve rate cut Wednesday is a sure thing, with traders waiting to see whether officials will validate expectations for a series of reductions into next year.
A $14 trillion record-breaking run in US equities is heading for an inflection point, with the first rate cut since Donald Trump became president likely to seize the spotlight in a week that will determine policy settings for half of the world’s 10 most-traded currencies.
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Bets that Fed easing will keep powering Corporate America put the S&P 500 above 6,600. The Nasdaq 100 saw its longest advance since 2023. A jump in Tesla Inc. erased its 2025 drop as Elon Musk’s $1 billion purchase. Alphabet Inc. hit $3 trillion. Also aiding sentiment was a framework deal on keeping TikTok running in the US, with Trump saying he’d talk to China’s Xi Jinping Friday.
Treasuries rose, with two-year yields hovering near the lowest since last September. The dollar slid.
Signs of labor-market weakening and no major inflation surprises have sealed the deal for what money markets project will be a quarter-point Fed cut in September. The big question, though, will be the pace of easing after that, with prices stubbornly above the central bank’s 2% target.
“Now the discussion will turn to how aggressively the Fed will act,” 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.”
Read: Trump Urges Powell to Cut Rates ‘Bigger Than He Had in Mind’
US policymakers on Wednesday will also release their quarterly update of economic and rate forecasts — known as the dot plot — and Fed Chair Jerome 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 to is the tone of Powell’s press conference and the “dot plot” projections, according to Fawad Razaqzada at City Index and Forex.com.
“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.
In a nod to data that suggests 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. 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.
“Near-term risk is centered on the tension between lagging, weak labor data and the Fed’s response that may not meet the markets’ ‘need for speed,’” Morgan Stanley’s Michael Wilson said. Still, he recommended buying any dips, and his most bullish scenario sees the S&P 500 climbing to 7,200 points by mid-2026.
JPMorgan Chase & Co. strategists said that while the stock market has disregarded weak indicators to post multiple record highs, this trend could reverse once the Fed makes its first cut of 2025.
“Once the easing resumes, equities could turn more cautious for a bit, and price in some more downside risk, in effect repricing the current, potentially complacent, stance,” a team led by Mislav Matejka wrote.
Bullish traders may have history on their side: The S&P 500 has been 15% higher, on average, a year after cuts resumed following a pause of six months or more, data from Ned Davis Research going back to the 1970s show. That compares to a 12% gain in the same period after the first cut of an ordinary cycle.
“With the weakening labor market and inflation seemingly under control, we expect a rate cut starting this week and totaling 100 basis points over the next four meetings through January 2026,” said Brian Buetel at UBS Wealth Management. “The stock market’s recent gains are being driven by strong earnings momentum and declining rates.”
Buetel says he expects modest upside between now and the end of the year, and the bull market continuing to gain steam into 2026, as investors have plenty of earnings momentum runway to work with.
Measures of projected volatility look dormant, and analysts’ profit views for the first half of 2026 are climbing back toward where they stood at the beginning of the year. Since bottoming in July, 2026 earnings estimates for the S&P 500 have climbed in each of the past nine weeks. At $295 per share, they’re in line with where they stood in late April, according to Bloomberg Intelligence.
Speaking of earnings, President Trump again called for an end to quarterly earnings reports, tapping into a long-running fault line in American capitalism over how much information should be disclosed by public companies.
Trump is pushing for a six-month reporting schedule as opposed to the current every three-months format. Ending quarterly results in favor of a six-month reporting schedule would “save money, and allow managers to focus on properly running their companies,” Trump said.
“The lack of transparency will make it harder for investors, but it will also free up company managements to focus on their businesses on a longer-term basis,” said Matt Maley at Miller Tabak + Co.
Lost in the shuffle a bit is Friday’s $5 trillion triple-witching expiration, with market watchers downplaying its impact. Looking back over 35 years reveals that intraday swings in the S&P 500 on expiry weeks tend to be marginally higher than the following week, which challenges the oft touted “free to move” theory.
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. Google considered selling off parts of its ad tech business to resolve antitrust concerns in Europe and the US, a lawyer for the company said Monday, but a Justice Department proposal to force the sale of its advertising exchange goes much further. Walt Disney Co. is bringing all of its marquee comics to a new digital platform and app in partnership with Webtoon Entertainment Inc. Live Nation Inc.’s Ticketmaster is being probed by the US Federal Trade Commission over whether it’s done enough to keep bots from illegally reselling tickets on its platform. CoreWeave Inc. said its shareholder Nvidia has agreed to buy cloud services valued at $6.3 billion, part of that company’s push to speed up the adoption of artificial intelligence across the economy. 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. Exxon Mobil Corp. is introducing a program to encourage more retail investors to support the company in proxy votes with an automatic system that threatens to limit the influence of activists. Snap Inc. is rolling out an updated version of its operating system for augmented-reality glasses, a move that signals it’s getting closer to launching its first consumer smart glasses next year. Robinhood Markets Inc. is launching a closed-end fund to give US retail investors exposure to private companies. Kering SA, whose luxury brands include Gucci, Saint Laurent and Balenciaga, said Monday it was the victim of a data breach that was discovered in June, the latest in a string of attacks on the consumer goods sector. What Bloomberg Strategists say…
“Equity traders, fixated on this week’s anticipated Fed rate cut, are unlikely to be unsettled unless Tuesday’s retail sales report reveals a sharp decline. Still, the outlook bears watching, as consumer strength has long served as a crucial pillar for both the economy and financial markets.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.5% as of 4 p.m. New York time The Nasdaq 100 rose 0.8% The Dow Jones Industrial Average rose 0.1% The MSCI World Index rose 0.5% Bloomberg Magnificent 7 Total Return Index rose 2% The Russell 2000 Index rose 0.3% Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.3% to $1.1765 The British pound rose 0.4% to $1.3609 The Japanese yen rose 0.2% to 147.39 per dollar Cryptocurrencies
Bitcoin fell 0.4% to $115,335.51 Ether fell 2.7% to $4,493.87 Bonds
The yield on 10-year Treasuries declined three basis points to 4.04% Germany’s 10-year yield declined two basis points to 2.69% Britain’s 10-year yield declined four basis points to 4.63% The yield on 2-year Treasuries declined two basis points to 3.54% The yield on 30-year Treasuries declined two basis points to 4.66% Commodities
West Texas Intermediate crude rose 1% to $63.32 a barrel Spot gold rose 1% to $3,680.75 an ounce ©2025 Bloomberg L.P.