The Dow Jones Industrial Average added 83.51 points, or 0.24 per cent, to 35,416.98, the S&P 500 added 4.46 points, or 0.10 per cent, to 4,554.89 and the Nasdaq Composite gained 40.73 points, or 0.29 per cent, to 14,281.76
MSCI’s global stock index rose on Tuesday while the dollar dropped as a Federal Reserve official signalled that the U.S. central bank was done hiking rates and could even consider rate cuts if inflation keeps declining.
The U.S. dollar index reached a 3-1/2 month low and was on track for its biggest monthly decline in a year as investors took the view that growth in the U.S. is beginning to slow down, with the market starting to price in a rate cut by the first half of the year.
Fed Governor Christopher Waller strengthened these speculations by flagging the possibility of lowering the Fed policy rate in the months ahead if inflation continues to drop. Waller also said he was “increasingly confident” the present interest rate setting would prove sufficient to lower inflation to the Fed’s target of 2 per cent.
Another Fed governor, Michelle Bowman, said the central bank will likely need to hike borrowing costs further in order to bring inflation back down to its target.
Traders seemed to take their cues from Waller with increased speculations for the first rate cut taking place as soon as March with the possibility for a 25 bps cut last at around 33 per cent, up from 21.5 per cent on Monday, the latest data from CME Group’s Fedwatch tool shows. The majority expected a cut of at least one notch in May, as per CME data.
The market saw Waller’s comments as the first sign the Fed “recognizes they might be able to cut rates next year” while other officials “took some of the euphoria” away, according to Anthony Saglimbene, Ameriprise chief market strategist.
And Saglimbene said: It is normal you will see stocks consolidate in the last few days of a really strong month. For the rest of the year, momentum is biased to the upside.
While trading in stocks was choppy, Wall Street indexes managed to end higher. The Dow Jones Industrial Average added 83.51 points, or 0.24 per cent, to 35,416.98, the S&P 500 added 4.46 points, or 0.10 per cent, to 4,554.89 and the Nasdaq Composite gained 40.73 points, or 0.29 per cent, to 14,281.76.
MSCI’s gauge of stocks across the globe added 0.27 per cent.
