Fed Officials Prompted Lower Bond Yields and Higher Stocks Prices
Wall Street walked nearly four-fifths of its highway from April dips below 5,000 on temporary price adjustment to a retest of all-time highs at 5,275 points, in terms of the S&P 500 broad barometer. The market climbed on flagship earnings fuel, partially flavoured by the Federal Reserve speakers' agenda. Touching the round figure of 5,200 milestone on May 7 to follow a rhetorical figure of speech by Richmond Fed chair Thomas Barkin who mentioned that the current monetary policy (of higher for longer interest rates) "was restrictive enough" to be able to bring inflation down to the central bankers' 2% annual target. He also noted that he was ready to track developments in the US labour market, as a "marked" turn to its weakness could also justify a rate cut this year, even though "multiple positive inflation readings" suggesting that the disinflation process is on track are needed. 175,000 of non-farm payrolls, against 238,000 in expectations and 315,000 a month ago, is probably that kind of weaker ground, which allowed him to make such conclusions. Good dovish arguments for reducing borrowing costs, at last, this autumn.
US Treasury bond yields went some lower, in hopes for a rate cut and to give way to another stock boom. Recently, the Fed frontman Jerome Powell merely contended to comments that the next rate move isn't likely to be a hike. The head of New York Fed, John Williams, said this Monday that monetary conditions "were adequate to bring down inflation". Because of Fed speakers' activity, the crowd is betting on a 65% probability of a rate cut before or during the Fed's September meeting with only a 21% chance for keeping the Fed's Fund Rate at 5.25%-5.50% unchanged before the November 7, 2024 meeting of the regulator. Based on these considerations, I would expect the market bulls have no reasons to stop climbing until a new record would be hit within a 5,350-5,500 area in summertime. The competitive environment encourages investors to choose a share in businesses, rather than money at a lower percentage interest.
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