Another significant rally in the US equities markets last week, with the S&P 500, Nasdaq and Dow Jones 1 to 2% higher, all closing at record highs. That was the 27th record day of the year for the S&P 500. This impressive performance was primarily driven by the Fed's first rate cut in nearly a year, with the central bank lowering the federal funds rate by 25bps. Powell signaled a shift towards easier monetary policy in response to rising unemployment concerns, with members now expecting another two cuts of 25bps in 2025.
The market rally was further supported by strong performance from mega cap technology stocks, like Apple and Alphabet, while Nvidia stock rose sharply fueled by news of a strategic partnership with Intel. Additionally, positive developments in US-China trade relations contributed to overall market optimism, after presidents Trump and Xi confirmed the TikTok framework agreement and laid the groundwork for an in-person summit in November to discuss broader trade issues, including tariff reductions.
For the upcoming week, market sentiment will be influenced by key inflation data (PCE) and a continued focus on consumer spending, with new readings of the US 2Q GDP out on Thursday. The Fed’s preferred inflation indicator will likely grow at a slower pace last month, offering policymakers some breathing room to address weakness in the US labor market.
