2/7/2024

Fed officials estimate inflation rate

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Key points:

  • The Dow Jones, S&P 500 and Nasdaq were mostly lower but rose to close the session.
  • Fed officials are monitoring U.S. inflation to provide clearer commentary on rate cut forecasts.
  • More than half of the S&P 500 companies reported profits, with 81.2% beating expectations.

During the recent trading session in the US stock market, traders closely examined the earnings of major US companies and statements from Federal Reserve policymakers to gather insights into the anticipated initial interest rate reduction.

Most of the session witnessed a decline in shares, followed by a last-minute surge. The Dow Jones Industrial Average experienced a gain of 141.24 points, equivalent to 0.37%, closing at 38,521.36. The S&P 500 also saw an increase of 11.42 points, or 0.23%, reaching 4,954.23, while the Nasdaq Composite registered a modest rise of 11.32 points, or 0.07%, concluding at 15,609.00.

The rate cut will depend on the level of inflation

Minneapolis Fed President Neel Kashkari expressed that the central bank is still grappling with inflation, highlighting that despite a rapid decrease, the three- and six-month data generally align with the Fed’s 2% target.

On a similar note, Cleveland Fed President Loretta Mester suggested that if the US economy performs as anticipated, it might pave the way for a rate cut. However, she emphasized her reluctance to propose a specific timeframe for easing policy due to uncertainties surrounding inflation.

Fed Chairman Jerome Powell, in the preceding week, extinguished any lingering expectations for a March rate cut. He underscored the importance of prudence in deciding when to cut rates, emphasizing that a robust economy allows time to instill confidence in the control of inflation.

More than half of the S&P 500 companies have already reported profits

The KBW Regional Banking Index experienced a 1.4% decline, marking a six-session downturn of 12.6%. New York Community Bancorp’s shares plummeted by 22.2%, reflecting a substantial 60% loss in value following an unexpected quarterly loss announcement last week, attributing it to write-offs related to certain real estate clients.

Contrastingly, the Dow Jones Transport Average saw a 2.1% increase, buoyed by positive indicators of robust demand for air travel. Frontier Group Holdings witnessed a 20.8% surge in its shares after pleasantly surprising investors with a break-even financial report.

Over half of the S&P 500 companies reported profits, with an impressive 81.2% surpassing expectations, as reported by LSEG. The overall forecast for S&P 500 earnings in the fourth quarter is anticipated to show an 8.1% rise compared to the same quarter in the previous year.

Shares of GE HealthCare Technologies experienced an 11.6% rise following the healthcare company’s announcement of fourth-quarter earnings that exceeded expectations.

In terms of market performance, the S&P 500 recorded 27 new 52-week highs and 8 new lows, while the Nasdaq boasted 110 new highs and 122 new lows.

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