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Markets Coming to Terms with Limited Rate Cuts in 2024
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Wednesday, April 3rd, 2024
Market indices scraped by for the most part today, digging out of negative territory at the opening bell to slightly in the green — aside from the blue-chip Dow index, which dipped another -43 points , -0.11% — by the close. The S&P 500 reversed the Dow’s day, +0.11%, while the Nasdaq and Russell 2000 performed better: +0.23% and +0.55%, respectively. As of today, the small-cap Russell index is back in positive territory over the past month of trading.
Stronger-than-expected private-sector job results from Automated Data Processing (ADP - Free Report) before today’s open demonstrated a labor market not dimming steadily, as 184K new jobs in the private sector mark a reversal of the cooling in the labor market that market participants have come to expect. This cooling would reaffirm the opinion that the Fed will begin its series of three interest-rate cuts this calendar year, beginning in June. While today’s March data obviously allows for these data sets to play out over time, the “good news is bad news” narrative looks to have recently re-emerged.
Markets took in stride the markdown from six or seven rate cuts penciled-in by hopeful analysts at the start of the year to just the three the Fed’s recent dot-plot confirmed; even with the past few days of market pullbacks, the Russell is still +3.2% year to date, the Dow +3.7%, the S&P +9.9% and the Nasdaq is +10.2% from the first of the year. But the hotter the forthcoming economic prints come in, the more in-doubt investors may turn regarding whether three 25 basis-point (bps) cuts are even viable in 2024. This is an election year, after all, which may dim the odds of a September cut. A May cut is already demonstrably off the table, leaving only four more Fed meetings for the year.
After today’s close, Levi Strauss & Co. (LEVI - Free Report) reported better-than-expected results for its fiscal Q1. Earnings of 26 cents per share outpaced the Zacks consensus by 6 cents, while quarterly revenues of $1.56 billion were further along than the $1.53 billion expected. The denim giant has not missed on earnings in any quarter since it re-emerged with an IPO in 2019, and is a fairly auspicious start to the tenure of new CEO Michelle Gass. Shares are up +6% in late trading on the news.
Tomorrow brings us more information of some market consequence: Initial and Continuing Jobless Claims for the last week or two will be joined ahead of the opening bell by new U.S. Trade Balance numbers. Aside from these, we’ll hear from a host of Fed Presidents, including Philadelphia’s Harker, Richmond’s Barkin, Chicago’s Goolsbee, Cleveland’s Mester, Minneapolis’ Kashkari and Fed Governor Adriana Kugler. If Kugler’s address this afternoon is any indication, look for these Fed members to assure the markets that rate cuts are indeed considered appropriate in the current calendar year. The next Fed meeting adjourns four weeks from today.
Image: Bigstock
Markets Coming to Terms with Limited Rate Cuts in 2024
Wednesday, April 3rd, 2024
Market indices scraped by for the most part today, digging out of negative territory at the opening bell to slightly in the green — aside from the blue-chip Dow index, which dipped another -43 points , -0.11% — by the close. The S&P 500 reversed the Dow’s day, +0.11%, while the Nasdaq and Russell 2000 performed better: +0.23% and +0.55%, respectively. As of today, the small-cap Russell index is back in positive territory over the past month of trading.
Stronger-than-expected private-sector job results from Automated Data Processing (ADP - Free Report) before today’s open demonstrated a labor market not dimming steadily, as 184K new jobs in the private sector mark a reversal of the cooling in the labor market that market participants have come to expect. This cooling would reaffirm the opinion that the Fed will begin its series of three interest-rate cuts this calendar year, beginning in June. While today’s March data obviously allows for these data sets to play out over time, the “good news is bad news” narrative looks to have recently re-emerged.
Markets took in stride the markdown from six or seven rate cuts penciled-in by hopeful analysts at the start of the year to just the three the Fed’s recent dot-plot confirmed; even with the past few days of market pullbacks, the Russell is still +3.2% year to date, the Dow +3.7%, the S&P +9.9% and the Nasdaq is +10.2% from the first of the year. But the hotter the forthcoming economic prints come in, the more in-doubt investors may turn regarding whether three 25 basis-point (bps) cuts are even viable in 2024. This is an election year, after all, which may dim the odds of a September cut. A May cut is already demonstrably off the table, leaving only four more Fed meetings for the year.
After today’s close, Levi Strauss & Co. (LEVI - Free Report) reported better-than-expected results for its fiscal Q1. Earnings of 26 cents per share outpaced the Zacks consensus by 6 cents, while quarterly revenues of $1.56 billion were further along than the $1.53 billion expected. The denim giant has not missed on earnings in any quarter since it re-emerged with an IPO in 2019, and is a fairly auspicious start to the tenure of new CEO Michelle Gass. Shares are up +6% in late trading on the news.
Tomorrow brings us more information of some market consequence: Initial and Continuing Jobless Claims for the last week or two will be joined ahead of the opening bell by new U.S. Trade Balance numbers. Aside from these, we’ll hear from a host of Fed Presidents, including Philadelphia’s Harker, Richmond’s Barkin, Chicago’s Goolsbee, Cleveland’s Mester, Minneapolis’ Kashkari and Fed Governor Adriana Kugler. If Kugler’s address this afternoon is any indication, look for these Fed members to assure the markets that rate cuts are indeed considered appropriate in the current calendar year. The next Fed meeting adjourns four weeks from today.
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