Apr 8 2024:A cautionary tone from Federal Reserve officials on Thursday regarding the necessity to be cautious with interest-rate cuts until inflation slows down visibly dampened a stock rally on Wall Street and triggered a surge in bond prices.
Global equity markets had initially risen after data showed an increase in new claims for U.S. unemployment benefits, reinforcing expectations for the Fed to cut rates soon, ahead of the key jobs report scheduled for Friday.
However, several policymakers tempered these expectations by advocating a cautious approach to monetary easing.
Richmond Fed President Thomas Barkin stated that the central bank has time to wait for inflation to clear before considering rate cuts. Minneapolis Fed President Neel Kashkari suggested that if inflation remains subdued, rate cuts may not be necessary by the year’s end. Chicago Fed President Austan Goolsbee highlighted outsized price increases in housing services as a significant obstacle to achieving the Fed’s 2% inflation target.
Rick Meckler, a partner at Cherry Lane Investments, noted that the market, which had anticipated a rate-cutting cycle, is now experiencing doubt about whether it will occur this year.
Despite an early rally in gold prices to an all-time high and the S&P 500 nearing a fresh record, Wall Street closed significantly lower, with major indices like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all experiencing declines.
Bond yields fell late in the session as investors adjusted their positions ahead of Friday’s March jobs report, with expectations for a rate-cutting cycle remaining strong among investors.
Oil prices continued to climb, benefiting from geopolitical tensions and output cuts despite concerns about potential Fed rate cuts. Brent futures for June settled higher, as did U.S. West Texas Intermediate futures for May.
Gold prices, which had reached an all-time high earlier, saw a slight pullback during the session.
