Stocks Rally and Gold Reaches Record Highs on Expectations of Steeper Fed Rate Cuts
US Stocks rose on Friday, with gold hitting record highs, as investors speculated on the possibility of the Federal Reserve making a more aggressive move to cut rates at its upcoming policy meeting. Futures tied to the Fed’s policy rate now indicate a 43% chance of a half-point rate cut, up from 28% earlier in the week. This anticipation of steeper cuts boosted Stocks, gold, and Treasury prices, while driving down the dollar.
At midday, all three major US indexes were up, with the S&P 500 rising by 0.72%, the Dow by 0.56%, and the Nasdaq by 0.64%. Globally, MSCI’s stock index rose by 0.64%.
Former New York Fed President Bill Dudley’s comments suggesting a “strong case for 50” added to hopes for a larger rate cut. However, recent economic data hint at a cautious approach from the Fed, as they consider cutting rates for the first time since 2020.
The dollar weakened against major rivals, while Treasury yields fell as investors anticipated Fed rate cuts. Gold prices reached a record high of $2,583.50 an ounce, while oil prices retreated as US production resumed post-Hurricane Francine.
In Asia, Stocks in China and Japan closed lower, with the Nikkei down by 0.48% and the Shanghai Composite by 0.68%. The dollar dropped to its weakest level against the yen since December, while Treasury yields declined.
Overall, market sentiment remains influenced by expectations of Fed rate cuts, geopolitical events, and economic data.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.