NEW YORK: Wall Street’s main stock indexes extended their gains in choppy trading on Monday after clocking their best week of the year, while investors looked ahead to Federal Reserve Chair Jerome Powell’s speech at Jackson Hole for rate-cut indications. The benchmark S&P 500 clinched a seven-day winning streak on Friday, its longest since October 2023, after a batch of strong economic data eased investor concerns about a recession in the world’s largest economy.
That was a sharp turnaround from an equities selloff earlier in the month after a higher-than-expected increase in the US unemployment rate for July fanned worries about the health of the economy. Goldman Sachs lowered the odds of the United States slipping into a recession in the next 12 months to 20 percent from 25 percent following the latest weekly jobless claims and retail sales reports.
Other stock markets also climbed Monday following last week’s strong performance, with gold prices soaring ahead of a meeting of central bankers that could give fresh signals about the US interest-rate outlook. "Investors and analysts alike will be paying close attention to any signals from Fed officials about the future direction of US interest rates,” said Luca Santos, currency analyst at ACY Securities.
"There’s growing speculation that... Powell might hint at the possibility of starting rate cuts as early as September. But the size of the cut is still up in the air.” Santos said a "modest” cut of 0.25 percentage points seems likely while a larger 0.50-point reduction "would need stronger evidence of a weakening US job market”.
Bets on a series of Fed rate cuts weighed on the dollar, with the yen among the big gainers as traders assess the chances of another Bank of Japan hike at its next meeting. The currency rose sharply Monday against both the dollar and the euro.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the "big players are increasing bets that the Bank of Japan will continue hiking the rates despite the sharp market reaction”.
Gold was propelled to a new all-time high on Monday, fuelled by expectations for Fed cuts that will make the precious metal more attractive to investors. Gold had climbed to unprecedented heights on Friday, breaking above the $2,500 barrier for the first time. Oil prices were down again after last week’s losses, on the back of demand worries as China’s economy struggles to recover.
Minutes from the Fed’s last policy meeting are due on Wednesday, and Powell will speak at the economic symposium in Jackson Hole on Friday, with investors keeping an eye out for any signs of acknowledgment of a rate cut in September. "They’re expecting Powell to perhaps signal suddenly the Fed’s upcoming actions. I’m not sure that will actually happen but the entire market will be focused on the proceedings of the Jackson Hole meeting,” said Peter Andersen, founder of Andersen Capital Management. — Agencies