The S&P 500 is hitting a new all-time high today, with Wall Street benefiting primarily from a significant shift in expectations for Fed policy. Following weaker U.S. labor market data, investors have sharply scaled back bets on an October rate hike. The probability of such a move now stands at around 20%, down from nearly 70% just a week ago.
For equities, this creates a much more favorable backdrop. Reduced expectations of an aggressive near-term tightening cycle are easing pressure on valuations, while slightly lower U.S. Treasury yields are providing an additional tailwind for stocks. Technology stocks are benefiting the most, supported by improving sentiment around interest rates as well as continued enthusiasm surrounding AI.
The market narrative is now starting to shift, however, from the Fed to corporate earnings. Third-quarter earnings season kicks off next week with the major banks. The market consensus calls for S&P 500 earnings to grow by more than 30% year over year, with the technology sector and AI-related investment expected to account for a significant share of that growth.
For now, Wall Street has support coming from two directions. The risk of an October Fed rate hike has fallen sharply, while earnings expectations remain very strong. With the S&P 500 already at a record high, the next leg of the rally will likely depend primarily on corporate earnings and forward guidance. If earnings season delivers on current expectations, the bull market could still have further room to run.
Source: XTB Research
Daily Summary: New Records on Wall Street. Markets Await the New Earnings Season
US Open: Wall Street Pushes Back Expectations of Another Fed Hike
US trade deficit larger than expected 🗽 US indices hit all-time high
Daily Summary: Yields at their highest since 2002, yet Wall Street is still rising🚨
The material on this page does not constitute as financial advice and does not take into account your level of understanding, investment objectives, financial situation or any other particular needs.
All the information provided, including opinions, market research, mathematical results and technical analyses published on the website or transmitted to you by other means is provided for information purposes only and should in no event be interpreted as an offer of, or solicitation for, a transaction in any financial instrument, nor should the information provided be construed as advice of legal or fiscal nature.
Any investment decisions you make shall be based exclusively on your level of understanding, investment objectives, financial situation or any other particular needs. Any decision to act on information published on the website or transmitted to you by other means is entirely at your own risk. You are solely responsible for such decisions.
If you are in doubt or are not sure that you understand a particular product, instrument, service, or transaction, you should seek professional or legal advice before trading.
Investing in OTC Derivatives carries a high degree of risk, as they are leveraged based products and often small movements in the market could lead to much larger movements in the value of your investment and this could work against you or for you. Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience, before trading, and if necessary, seek independent advice.