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. Megacaps led the charge, with Tesla Inc. soaring 6% as Elon Musk bought $1 billion worth of shares and Alphabet Inc. hitting $3 trillion. Nvidia Corp. underperformed as China ruled that violated anti-monopoly laws with a high-profile 2020 deal.
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.”