Stocks Extend Record Run As Fed Cut Bets Build: Markets Wrap

A rally in global stocks pressed on as mounting expectations for Federal Reserve interest rate cuts stoked risk-on sentiment and drove bond yields lower.

The S&P 500 looked set to build on Tuesday’s record close, with futures for the benchmark up 0.2%. Europe’s Stoxx 600 index rose 0.4% in a second session of gains. Most members of the Magnificent Seven tech megacaps climbed in premarket trading. The MSCI All Country World Index advanced 0.3% to a fresh all-time high.

Bonds rose in most markets. US Treasuries climbed across the curve, with the 10-year yield dropping four basis points to 4.25%. The dollar retreated 0.4%.

Equity markets are swept up in a risk-on rally as a so-far modest rise in US goods prices has tempered fears over the impact of tariffs. The data has bolstered bets that the Fed will resume rate cuts next month and act more aggressively to shield a labor market showing signs of strain.

Optimism over a softening rate stance is further buoyed by easing global trade tensions and a significantly stronger-than-expected US earnings season.

“The bull case remains a convincing one, with earnings growth solid, and a cooler tone on trade continuing to prevail, all the while dovish policy expectations help to provide a cushion against any worries that the economy may be softening,” said Michael Brown, senior research strategist at Pepperstone.

Swaps are pricing in about a 90% chance of a quarter-point cut in September, up from about 80% before Tuesday’s inflation data, with at least three more similar moves expected by June.

US Treasury Secretary Scott Bessent told Fox Business that “the real thing now to think about is should we get a 50 basis-point rate cut in September.”

US equities have staged an astonishing rebound from their April lows, when Donald Trump’s tariffs upended markets. The S&P 500 is closing in on a 10% advance for the year, with most of the fresh gains coming in the past two months.

The volatility that has defined much of this year’s trading has eased, with the Cboe Volatility Index — Wall Street’s fear gauge — falling to its lowest level since December. Treasury market swings have also subsided, as the ICE BofA MOVE Index, a measure of expected yield fluctuations, dropped to its lowest since January 2022.

“Quite simply there is a momentum drive higher here,” said Guy Miller, chief market strategist at Zurich Insurance Co. “The US economy is in stronger shape than many had expected and the risk of recession is continuing to diminish. Markets can go even higher.”

In commodities, brent crude dipped below $66 a barrel after the International Energy Agency said oil markets are on track for a record surplus next year as demand growth slows and supplies swell. Gold rose 0.4% as the metal, which pays no interest, typically benefits from a lower rate environment.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 6:21 a.m. New York time

• Nasdaq 100 futures rose 0.3%

• Futures on the Dow Jones Industrial Average rose 0.3%

• The Stoxx Europe 600 rose 0.4%

• The MSCI World Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.4% to $1.1725

• The British pound rose 0.5% to $1.3574

• The Japanese yen rose 0.4% to 147.29 per dollar

Cryptocurrencies

• Bitcoin rose 0.2% to $120,402.26

• Ether rose 1.8% to $4,702.74

Bonds

• The yield on 10-year Treasuries declined four basis points to 4.25%

• Germany’s 10-year yield declined five basis points to 2.69%

• Britain’s 10-year yield declined three basis points to 4.59%

Commodities

• West Texas Intermediate crude fell 0.8% to $62.69 a barrel

• Spot gold rose 0.5% to $3,364.94 an ounce