Treasury yields continued to rise with the two-year yield at the lowest since 2022, while the US Dollar index continued its slide below the mark of 98.
Slower growth, expectations that the rise in inflation will not be as hot as anticipated, falling yields and hopes of accelerated rate cuts by the central bank are pointing to an optimistic outlook for stocks, according to Invesco.Data from Bloomberg points that while the S&P 500 has declined 1% on average in September going back to 1971, it has gained 1.2% in months when the Federal Reserve has cut rates and the economy was not contracting.
“That helps explain why equities are generally welcoming the prospect of Fed easing after a nine-month pause,” said Jim Reid of Deutsche Bank AG. “Recession probabilities are still relatively low, but the latest labor-market data injects a dose of caution given payroll growth has slowed to a crawl.”All eyes are now on the inflation figures, both on the producer prices (to be reported on Wednesday) and on the Consumer prices (to be reported on Thursday). The CPI inflation is seen rising 0.3% month-on-month for the second month in a row, according to consensus estimates.
“While a September cut next week is likely a done deal, the pace of cuts moving forward from there will hinge in large part on how ‘bad’ the inflation data is,” according to strategists at the Bespoke Investment Group.
Most analysts continue to expect further upside for US equities, with some even projecting the S&P 500 to hit 7,000 by the end of the year. However, JPMorgan is of the view that while the current bull run seems “unstoppable”, the Fed policy may trigger a “sell the news” event in the market.
All eyes will also be on the Apple event later tonight. Analysts do not see much upside on the stock after an addition of $430 billion to its market capitalisation starting August. The stock is still down 5% in 2025 despite a recovery from April lows.
(With Inputs From Agencies.)
