Stocks Extend Post-Election Gains Ahead of Fed: Markets Wrap
(Bloomberg) — US equity futures extended a post-Election Day advance as traders looked ahead to expectations that the Federal Reserve will cut interest rates later on Thursday.
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S&P 500 contracts gained 0.2%, after the index notched a record high on Wednesday. The dollar retreated 0.6% following its best day since 2022. Treasury yields eased after Wednesday’s historic selloff. Jobless claims for the Nov. 2 week came in below estimates, highlighting the resilience of the labor market.
The Fed is expected to lower rates by a quarter-point and Chair Jerome Powell will hold a press conference later in the day that may provide details on the path for monetary policy. It’s also likely that Powell will face questions about what Donald Trump’s returns to the White House will mean for economic growth and inflation.
“What would be interesting is not so much the cut, but communication around December and next year,” James Vokins, portfolio manager at Aviva Investors, said in an interview. For Powell, “it will be a very difficult situation and it will be a very difficult communication to manage, he will have to be careful not to be too firm on any particular direction.”
Traders have pared back expectations for the Fed to lower interest rates over the next year on concern that Trump’s policies will exacerbate inflation. Money markets are currently betting on about 1 percentage point of Fed cuts by September 2025, compared to 1.1 percentage points on Tuesday.
While S&P 500 futures pointed toward more muted gains after Wednesday’s surge, Evercore ISI strategists said the rally was nowhere near done. Trump’s plans to slice through red tape could propel the S&P 500 another 11% through the middle of next year, they said.
History shows the bull market is “still an infant,” ISI strategist Julian Emanuel wrote in a note. “This market will be driven higher by the policy prospect of deregulation in DC,” he said, setting a price target for the index of 6,600 points by end-June 2025.
In the UK, the Bank of England lowered its key interest rate by 25 basis points to 4.75%. Governor Andrew Bailey said that borrowing costs are likely to fall “gradually from here” and that last week’s UK budget will lift inflation by just under half a percentage point at its peak.
Czech policymakers also delivered an eighth consecutive interest-rate cut as weak economic growth eclipsed concerns about inflationary risks.
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