U.S. stocks looked set to extend their recent climb on Tuesday, with the S&P 500 charging back towards its all-time high, as hopes that the Federal Reserve will cut interest rates as early as next month boosted sentiment.
Market focus was on the Fed’s next policy meeting on June 18-19 and what kind of hints the central bank could drop to signal the frequency of rate cuts through the end of the year.
Fed Chair Jerome Powell opened the door to a possible rate cut last week, when he said the Fed «will act as appropriate to sustain the expansion».
As far as markets are concerned, the big question now facing Fed policymakers is when, not whether, to act.
Investor expectations of a Fed rate cut next week currently stand at 18.3%, according to ’s Fed Rate Monitor Tool. The market gives a 79.1% chance of a Fed rate cut in July, up from around 20% a month ago.
Odds of a second rate cut in September stand at around 56%, while futures traders are pricing in a 45.9% chance of a third rate cut at the Fed’s December meeting.
Renewed hopes of further easing from the Fed have helped spark a surge in equities on Wall Street this month. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite have all gained around 5% since the start of June.
