Earlier this month, Jerome Powell from the Federal Reserve, teased about setting new rate cuts despite the on-going U.S.-China trade wars. In a statement, the Feds says that the cuts will help markets adjust.
Stocks rose last week, as both the S&P 500 and the Dow Jones Industrial Average inched higher by less than 1%. The increase pushed indexes a bit closer to the 2019 highs set in late April — as stocks are up significantly so far this year.
However, ahead of the Fed decision due at 2 p.m. Eastern Time Wednesday and Powell’s news conference a half-hour later, critics are suggesting that rather than pleased, markets will get disappointed.
Notably, reports revealed that various markets used the snippet of information to rise globally — except for the US Labor Department. May’s employment report showed that there were only 75,000 jobs provided in the month — a disappointing number compared to expectations of 185,000. Furthermore, employment rates are evidence of cracks forming in the economy.
Moreover, it has been cited that fed cuts will most unlikely be made at an earlier date, given that federal-funds futures pointed to an 87% chance for a July cut and 26% chance for an easing this month, as of late Friday, CME Group data show.
The 10-year Treasury also note TMUBMUSD10Y, +0.37% closing at a paltry 2.093% on Friday, while the S&P 500 SPX, -0.16% is off a mere 2% from its April 30 record and the Dow Jones Industrial Average DJIA, -0.07% is about 2.8% shy of its Oct. 3 all-time high, while the Nasdaq Composite indexes COMP, -0.52% was about 4.5% off its 52-week high. That is notable because the Nasdaq slipped into correction territory, commonly defined as a 10% drop from a recent peak, about two weeks ago.
Overall, it is safe to assume that fed cuts will not be announced this month and will likely happen in July based on the current market. There’s also the friction between the US and China to put into consideration that will most probably not help favor towards cuts this week.
