The stock market rallied robustly on Federal Reserve day, fueled by dovish remarks from Chairman Jerome Powell and stellar performances by key technology stocks. The Nasdaq 100 surged 3%, buoyed by Nvidia Corp.’s remarkable 13% jump, which added a staggering $329 billion to its market value following a bullish analyst call. Meta Platforms Inc. also soared on strong sales results, while Qualcomm Inc. provided a bullish revenue forecast. Concurrently, Treasury yields and the dollar both edged lower.
During a press conference, Powell indicated the possibility of rate cuts “as soon as” September, signaling a shift in the Fed’s stance. The Fed’s statement reflected a nuanced approach, emphasizing vigilance towards both sides of its dual mandate rather than focusing solely on inflation.
Neil Dutta, of Renaissance Macro Research, observed, “The press conference was more dovish than the statement. It seems they are adopting a wait-and-see approach despite the data already aligning with their desired direction.”
The S&P 500 ETF (SPY) climbed 1.6%, while the ETF tracking longer-dated Treasuries (TLT) gained 1%, marking the largest cross-asset rally of the year on a Fed policy announcement day. The Bloomberg “Magnificent Seven” index of megacap stocks surged 3.5%, and the Russell 2000 index of small firms added 0.5%.
The bond market also saw accelerated gains, buoyed by geopolitical tensions in the Middle East and a rally in oil prices. Treasuries achieved their third consecutive month of gains, the longest winning streak since 2021. Meanwhile, the yen strengthened as the Bank of Japan adjusted rates and announced plans to reduce bond purchases.
Chris Zaccarelli, at Independent Advisor Alliance, remarked, “Powell has adeptly kept the Fed’s options open. The market anticipates a rate-cutting cycle to commence in September.”
Market sentiment was solidified by the Fed’s updated statement, which highlighted concerns over the labor market, reinforcing expectations for a rate cut at the Fed’s upcoming meeting on September 17-18.
Peter Boockvar, of the Boock Report, commented, “Powell is cautious in committing fully just yet, preferring to await further data.”
Ronald Temple, at Lazard, noted, “The Fed has clearly signaled a September interest-rate cut, backed by weakening inflation, loosening labor market conditions, and moderated growth.”
Looking ahead, swap traders are fully pricing in a quarter-point rate cut in September, with expectations of nearly 70 basis points in total cuts by year-end.
David Russell, at TradeStation, emphasized upcoming economic data releases, stating, “Jobs data and CPI figures will be critical. Positive outcomes could pave the way for clearer guidance from Powell at the Jackson Hole summit in late August.”
This strong market response reflects growing anticipation and positioning ahead of potential Fed actions in the coming months.
