Rate Cut Rhetoric Blunts US Stock Market Performance


Analysts' speculation regarding the central bank policy within the United States has been very much based on sentiment over the past few months.

A few months ago, a quick glance at the mainstream financial headlines would have been enough to ensure a clear view that 2024 would be a year of reducing interest rates, and commentators and analysts had even made predictions regarding actual times during the year at which rate cuts would take place.

These predictions were scuppered in February when minutes from the Federal Open Markets Committee (FOMC) meeting at the end of January stated that the Federal Reserve Bank would not be reducing interest rates in the early part of this year and was sticking firmly to its conservative policy of working toward a sustainable 2% inflation rate.

That dialogue has resurfaced this morning, this time as a result of the Federal Reserve having maintained its forecast for lowering interest rates three times this year despite not having done so in the first quarter as was expected by so many pundits, but this time, the talk is more focused on whether these will actually go ahead at all.

In Minneapolis, Minnesota, the state Federal Reserve president Neel Kashari commented that the central bank might look to keep interest rates at their current level for the remainder of the year if inflation progress stalls, an interesting remark at the beginning of earnings season for many large publicly listed North American companies.

Some asset managers have written to their clients and advised that they hold the view that the Federal Reserve will not reduce interest rates this year. What will actually happen is still very much open to speculation until any decision is announced by the central bank.

On this point, stock markets across the United States remained flat as US equities concluded yesterday's New York trading session nearly flat, as investors embarked on a significant week poised to include the latest inflation figures, which could influence expectations for interest rate cuts, and the commencement of the earnings season for the first quarter.

Indicative pricing only

Despite the recent tech stock boom, NASDAQ's Tech 100 stocks are relatively flat, having concluded yesterday's trading session at 18,116.1 points according to FXOpen pricing, a far cry from the 18,414.7 reached on the last day of March.

Indicative pricing only

The S&P500 is also on the back foot, yesterday's New York session having seen the index tail off to 5,206.4 at the end of the trading day according to FXOpen pricing, which represents a considerable slump from 5,283.5 points at the end of March.

As earnings season begins and the market participants await the fiscal results for many large corporations, the stock markets hang in the balance, as Federal Reserve policy could affect future corporate performance. Keeping interest at the same rate means companies have to continue to tie up capital paying monthly commitments, whereas reducing interest rates would mean less capital needed to pay monthly commitments and more available capital for commercial growth or to keep as profit.

Interesting times lie ahead as speculation grows without a clear indication of any change in monetary policy.

Trade global index CFDs with zero commission and tight spreads. Open your FXOpen account now or learn more about trading index CFDs with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Indices

S&P 500 Analysis: Good News is Bad News Tech Stocks Back in Vogue as Nasdaq 100 Rallies to Record High The S&P 500 Index Has Reached a Significant Resistance Level France Joins European Stock Boom as CAC 40 Index Heads for Highs The Hang Seng Index Has Risen by Over 13% in 2 Weeks

Latest articles

Forex Analysis

GBP/JPY at Highest Level in Over 15 Years

As shown by today's GBP/JPY chart, the exchange rate has not only surpassed the psychological level of 200 yen per pound but has also exceeded the peak of 29 April 2024. The market is now experiencing prices last seen


Elon Musk Contributes to NVDA Price Surge to a New Record

Yesterday, on Tuesday, Nvidia's stock price reached a historic high, surpassing the $1,130 mark, increasing by almost 7% relative to Monday's closing price. This happened after a turbulent past week, during which Nvidia published a very strong report that

What Is a Falling Knife in Trading?
Trader’s Tools

What Is a Falling Knife in Trading?

It’s often repeated that traders should ‘never catch a falling knife.’ This phrase highlights the risks of buying into a rapidly declining asset. Understanding what a falling knife is, its causes, and strategies for trading it may help traders

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.