Although the Fed continued to keep interest rates unchanged at the July FOMC meeting, the Fed's resolution and Powell's press conference both sent strong signals of a rate cut in September. Powell made it clear at the press conference that if economic data continues to improve, especially if inflation continues to slow, the Fed will consider cutting interest rates in September. This statement quickly became the focus of market attention and set the tone for the next monetary policy adjustment.
Market expectations of interest rate cuts rise, US stocks, crude oil and gold all rise
Powell's speech was quickly transmitted to the market, triggering a full-scale carnival. The U.S. stock market took the lead in responding, with all three major indexes rising sharply. The Nasdaq, which is dominated by technology stocks, rose as high as nearly 3.2% in the late trading and led the major stock indexes; the S&P 500 index rose as high as more than 2.1%; and the Dow Jones Industrial Average, which is closely related to the economic cycle, rose as high as more than 1.1%. This performance not only reflects the market's expectations for future monetary policy easing, but also reflects investors' optimism about the prospects for economic growth.
At the same time, the gold market also ushered in a long-awaited surge. The expectation of interest rate cuts and the rapid escalation of tensions in the Middle East caused spot gold to close up more than $36, and the price of gold once exceeded $2,450 per ounce. The crude oil market was also not to be outdone. After the assassination of the leader of Hamas, the market was worried that geopolitical risks might further intensify. In addition, the sharp drop in US crude oil inventories provided strong support for the rise in oil prices. Oil prices jumped 4%, and WTI crude oil rebounded by more than $4 from the previous day's low, closing with the largest single-day increase since July.
This Friday's non-agricultural report is expected to continue the bull carnival sentiment
As the Fed's expectations of a rate cut in September have become increasingly solid, the market has generally accepted this "set in stone" fact. However, investors' attention has not stopped there. They are more concerned about the path of rate cuts after September, especially the probability of rate cuts in November and December.
According to CME's "Fed Watch" data, the probability of the Fed cutting interest rates by 25 basis points in September is 90.5%, and the probability of a cumulative 50 basis point cut by November is 71.1%. On Wednesday, the US ADP Research Institute released a report showing that the ADP new employment, known as the "small non-agricultural", fell more than expected, and the wage growth rate fell to the lowest level in three years, sending a signal of a slowdown in the US labor market and further consolidating expectations of a rate cut. The US non-agricultural employment report to be released this Friday (Eastern Time) will undoubtedly become the next important indicator of market sentiment.
If the non-farm report data shows that the job market continues to slow down, such as the number of new jobs is lower than market expectations, or the unemployment rate rises, this will provide a strong basis for the Fed to further relax monetary policy. In such a scenario, the market will not only consolidate its confidence in the September rate cut, but also expect the Fed to take a more aggressive rate cut to cope with potential economic growth pressure. This expectation will directly drive the bullish sentiment of risky assets such as gold and US stocks to continue to heat up, and the market may usher in a new round of carnival.
In short, the news that the Fed hinted at a rate cut in September has triggered a full-scale carnival in the market, and the prices of assets such as US stocks, precious metals, and crude oil have all risen sharply. This Friday's non-farm report will be the focus of market attention, and its results will directly affect the future monetary policy direction of the Fed and the market trend. Investors should pay close attention to the data release and adjust their investment strategies in a timely manner according to market changes.
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