Stocks Set New Highs, Treasuries Rally as Market Readies for Fed Rate Cut

Karishma Vanjani

Fresh signs of a slowing jobs market spurred a rally in the bond market, while a relatively benign inflation report has kept stocks trending higher this morning.

The Dow rose 445 points, or 1%, on pace for its fourth record close of the year. The S&P 500 rose 0.5%, while the Nasdaq was up 0.4%. Both indexes closed at their all-time highs yesterday.

Meanwhile, Treasuries are also rallying, with the 10-year yield lower by 0.027 percentage points.

The Federal Open Market Committee meets next week for the seventh time this year. Traders are sure the Fed will cut interest rates–and their sentiment likely got a further boost after this morning’s data releases. People filing for initial jobless claims jumped, while inflation, although higher than the Fed’s 2% target, was largely in line with expectations.

There are some questions in the market about whether the Fed cut rates by a half point or a quarter point next week, but what the Fed signals for the rest of the year is arguably more important.

“Far, far more important than the target decision for the back end of the curve and financial asset prices is what the Fed conveys for the rest of the cycle,” says Benson Durham, head of global policy and asset allocation at Piper Sandler. “Don’t expect any changes on this front, on balance.”