Market developments
Equities:
Stocks closed the week positively, hitting record highs amid speculation of rate cuts by the Federal Reserve. Technology stocks, led by companies like Nvidia and Microsoft, contributed to the S&P 500’s surge, defying concerns about concentration in certain shares. The S&P 500 erased weekly losses, rising 1%, with the Nasdaq 100 gaining even more. Despite concerns of narrow leadership, optimism prevails due to strong economic data, lower inflation expectations, and a possible easing of Fed rate hikes.
Fixed income:
A decrease in Treasury volatility boosted risk-taking by investors. Positive sentiment is fueled by a “Fed-friendly” report, supporting the case for potential rate cuts based on high consumer confidence and lower inflation expectation. Federal Reserve officials emphasize a data-driven approach for potential rate cuts amid declining inflation. Traders adjusted expectations, pricing in around 1.4 percentage points of reductions for the year, which is down from a week ago and led to bond indices ending the week lower.
Commodities:
Oil futures declined at the end of the week as traders evaluated factors like increasing supplies, demand outlook, U.S. production challenges, and tensions in the Middle East. The weak performance is attributed to geopolitical events not affecting actual supply and a perceived economic downturn, including a concerning housing sales report. Despite early gains, oil finished the week with a loss.