Last Updated: 4:24 PM EST
Stock indices finished today’s trading session in the green. The Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) gained 1.24%, 0.77%, and 0.49%, respectively. Investors have been becoming increasingly eager about Federal Reserve rate cuts, but history suggests that S&P 500 losses can occur when rate-easing cycles begin, according to the Wells Fargo Investment Institute (WFII).
Analyst Austin Pickle noted that since 1974, the S&P 500 has typically seen an average drawdown of about 20% over 250 days after the first Fed rate cut in a cycle. This means that the initial rate cut shouldn’t be seen as an automatic positive signal for the stock market.
The CME FedWatch tool indicates traders expect rate cuts to start in September and are pricing in a 56.7% chance. However, the Fed’s recent projections suggest only one 25-basis point cut in 2024. Pickle emphasized that the reason behind the rate cut is crucial. If cuts are made to adjust for falling inflation, stocks might perform well in the next six to 18 months. But if the Fed cuts rates aggressively due to economic disruptions, then stock performance could suffer.
WFII expects some near-term headwinds and has set a year-end target of 5,100-5,300 for the S&P 500. Nevertheless, it anticipates a stronger performance in 2025 with 5,600-5,800 price targets as inflation eases and economic growth supports earnings.
First Published: 4:30 AM EST
U.S. futures hovered near the flatline on Monday morning as investors entered a holiday-shortened week. Futures on the Nasdaq 100 (NDX), the S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) were up by about 0.23%, 0.1%, and 0.07%, respectively, at 3:45 a.m. EST, June 17.
In the previous week, the Nasdaq Composite and the S&P 500 gained 3.24% and 1.58%, respectively. On the other hand, the Dow Jones index registered a slight decline of 0.54%. Those moves came even after the Fed signaled a dovish approach to interest rates, potentially limiting cuts to just one by December.
Turning to this week’s economic reports, the Retail Sales and Industrial Production reports for May are due for release on Tuesday. Additionally, investors await the release of preliminary readings of the Global Manufacturing and Services Purchasing Managers’ Index (PMI) reports for June on Friday. It is worth noting that the market will remain closed on Wednesday in honor of Juneteenth.
On the earnings front, Lennar (LEN), KB Home (KBH), Darden Restaurants (DRI), Accenture (ACN), Jabil (JBL), Kroger (KR), and CarMax (KMX) will announce results this week.
Meanwhile, the U.S. 10-year treasury yield was up at the time of writing, floating near 4.24%. At the same time, WTI crude oil futures trended lower, hovering near $78.38 per barrel as of the last check.
Elsewhere, European markets opened higher today as investors looked forward to the Bank of England’s interest rate decision due later this week.
Asia Pacific Markets Traded Mixed on Monday
Asia-Pacific markets displayed a mixed performance today as investors evaluated a slew of key economic data from China. This included figures for May’s retail sales, industrial output, and urban unemployment rate.
Hong Kong’s Hang Seng index was up 0.04%, and China’s Shenzhen Component index gained by 0.31%. At the same time, China’s Shanghai Composite index was down 0.55%. Further, Japan’s Nikkei and Topix indices finished lower by 1.83% and 1.7%, respectively.
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