Editor
The Federal Reserve says it’s about time to start cutting interest rates, and Wall Street gains
Investors have turned their attention to this weekend’s closing trading session, hoping that the Fed will finally start cutting interest rates after waiting more than six months. The theme of the 2024 conference is “Reassessing the Effectiveness and Transmission of Monetary Policy.” The meeting was set in Jackson Holle, and as expected, it was about time to strategize cutting interest rates. The U.S. Federal Reserve chairman, Jerome Powell, says on the meeting, “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” Powell added, “The upside risks to inflation have diminished. And the downside risks to employment have increased.”
Arguably, the equation was different six months ago; it has changed as inflation moved closer to the policymaker’s target of 2%. Further, the Fed has shifted from focusing on price stability to reaching maximum employment. Powell shared a similar point in the Fed’s new shifting point. He said, “We will do everything we can to support a strong labor market as we make further progress toward price stability. With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market.”
This shift is due to a recent increase in the unemployment rate. A major downward revision in non-farm payrolls data this week, the largest since the global financial crisis, will provide significant discussion points for Fed Chair Powell. Broadly speaking, these developments will influence discussions on broader economic expectations.
Meanwhile, the U.S. stock market noticed a jump on its main three indexes, with the main S&P 500 benchmark rising by 1.06% to a 5.630.80 basis point to reach an all-time high this week. The tech-heavy composite Nasdaq rose by 1.45%, scoring the highest gains in the past three weeks. The Dow Jones Industrial Average jumped by 1.16% to 41.197.70 bps.
In other economic news, U.S. home sales for July rose to their highest level since July 2023. New home sales increased by 10.6%, reaching a seasonally adjusted annual rate of 739,000 units, the highest since May 2023. This was the sharpest sales increase since August 2022.
The sales pace for June was revised upward to 668,000 units from the previously reported 617,000 units. Beating the market expectation of reaching 625.000 units. Furthermore, here are some of the data points that were reported in the U.S. new home sales report:
New home sales, which represent over 10% of U.S. home sales, are recorded when contracts are signed and can be volatile month-to-month.
Year-over-year, new home sales increased by 5.6% in July.
The average rate on a 30-year fixed-rate mortgage dropped to 6.46%, the lowest since May 2023 and over half a percentage point lower than the same time last year.
Finally, as of 14:20 a.m. ET New York time, the West TexasIntermediatee was up by 2.7% to $74 per barrel, while Brent crude oil jumped by 2.14% to $75 per barrel.
