NEW YORK: Wall Street’s main indexes reversed course to gain on Tuesday after dovish comments from some Federal Reserve officials bolstered hopes of a potential rate cut next year.
Board Governor Christopher Waller hinted at lower interest rates in the months ahead if inflation continued to ease, while Chicago Fed President Austan Goolsbee said he believed overall inflation was coming down at a pace not seen since the 1950s.
Money market’s expectations of at least a 25-basis point rate cut in May 2024 rose to nearly 63% from about 50% before the central bank officials’ comments, according to the CME Group’s FedWatch Tool.
All three major indexes were on course for monthly gains after three straight months of losses, on the rate cut optimism. The rebound has also brought the S&P 500 within a very close range of its 2023 intra-day high.
“The (Fed) comments are refocusing investors on the idea that the inflation rate is coming down and as the inflation rate comes down, they’re hopeful that it’ll bring rates down, and ultimately bring the market higher,” said Rick Meckler, partner at Cherry Lane Investments.
Board Governor Michelle Bowman, on the other hand, indicated that the central bank will likely need to further raise borrowing costs to bring inflation down to its 2% target, keeping further gains in check.
Personal consumption expenditure data - the Fed’s preferred inflation gauge - and the “Beige Book”, a snapshot of the US economy, which are due later this week, will likely show how the economy is faring under tighter monetary conditions.
At 11:39 a.m. ET, the Dow Jones Industrial Average was up 174.29 points, or 0.49%, at 35,507.76, the S&P 500 was up 16.54 points, or 0.36%, at 4,566.97, and the Nasdaq Composite was up 59.27 points, or 0.42%, at 14,300.29.
Ten of the 11 major S&P 500 sectors were in the green, with utility stocks up 0.8% and leading gains.
Data showing a rise in US consumer confidence in November after three straight monthly declines also helped lift the market sentiment.
Among single stocks, Boeing added 2.3% after RBC Capital Markets upgraded the aerospace company to “outperform” from “sector perform” and set a Street-high price target.
US-listed shares of PDD Holdings jumped 17.6% after the Chinese e-commerce firm beat third-quarter revenue estimates.
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