The sinking Fed terminal rate
Main U.S. indexes rally: Nasdaq out front, up ~2.25%
All S&P 500 sectors green; Real Est leads
Dollar edges up; crude gains; bitcoin up >4%; gold dips
U.S. 10-Year Treasury yield jumps to ~3.91%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
THE SINKING FED TERMINAL RATE
With the market currently pricing an aggressive rate cut by the Federal Reserve, the U.S. central bank's terminal rate, or that level of rate considered neither restrictive or accommodative, has dropped to 3%, according to TD Securities.
It hit a high of 4.15% in mid-May.
For 2024, fed funds futures have priced about 106 basis points in cuts and about 83 bps more until June of next year.
"Given that the outlook for inflation has increasingly come into better balance, we don't think the Fed is about to risk an unnecessary deterioration in the labor market to reach the 2% objective. Risks have become truly two-sided, if not tilted toward downward employment outcomes," writes Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.
It wasn't too long ago that bond fund managers were forecasting a shallow easing cycle given sticky inflation and a still solid labor market. Many of them believed that the Fed's terminal or neutral rate would be at 3.5%-4%.
But things changed since that softer-than-expected U.S. jobs report.
Economic data will still be the focus in the run-up to the Fed's September meeting, but investors are no longer solely focused on inflation. Stronger numbers in key indicators could potentially lead market pricing to rebound, according to TD strategists in note.
For instance, a sharp correction lower in the unemployment rate next month could leave the market re-pricing cuts.
The Fed could lay out what its thinking at the Jackson Hole Symposium on August 22-24, or they can also comment following the August jobs report on September 6.
(Gertrude Chavez-Dreyfuss)
*****
FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
JGBS 'TREMENDOUSLY UNINTERESTING,' BUT HARD TO IGNORE - CLICK HERE
STIFEL STICKS WITH S&P 500 STILL SELLING DOWN TO 5000 - CLICK HERE
BUYING S&P 500 AFTER 5% SLUMP IS TYPICALLY PROFITABLE - GOLDMAN
WALL STREET BOUNCES BACK - CLICK HERE
THE VIX MADE A STATEMENT, BUT WILL IT HAVE MORE TO SAY? - CLICK HERE
RETAIL TRADERS' LONG TERM POSITIONING INTACT AFTER MONDAY'S ROUT - CLICK HERE
BANKS: "GOLD MEDAL FOR VOLATILITY" - CLICK HERE
SHARP MARKET WEAKNESS "AN OVERREACTION", SAYS UBS - CLICK HERE
BATTERED BANKS & TECH LEAD A MODEST BOUNCE - CLICK HERE
FUTURES POINT TO TURNAROUND TUESDAY - CLICK HERE
FED COMPOSES FRAUGHT MARKETS - CLICK HERE
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.