Market developments
Equities:
The S&P 500 closed near 5,225, for its third straight weekly gain, while the Dow rose for an eighth consecutive session. The stock market lost momentum after economic data pointed to a slowing economy amid persistent inflationary pressures, challenging the outlook for Federal Reserve rate cuts. Traders will closely watch Powell’s remarks next week and the upcoming CPI data for clues on the Fed’s policy path amid choppy growth and inflation signals.
Fixed income:
U.S. treasury 10-year yields remained flat at 4.50%, Fed officials like Dallas President Lorie Logan said it’s too early to consider rate cuts given disappointing inflation data, while Chair Jerome Powell signaled rates would likely stay high for some time. Economic growth slowed sharply in Q1 2024, but markets still expect the Fed to start cutting rates by year-end, with two 25 basis point cuts seen as more likely than one.
Commodities:
Geopolitical risks continue to support oil prices, though the Israel-Hamas conflict has not yet impacted production or exports from Persian Gulf countries. Despite expectations for OPEC+ to maintain cuts, RBC’s Helima Croft noted the possibility of “another plot twist” if there is a major change in market dynamics or a breakthrough in U.S.-Saudi negotiations.