All three US benchmarks rallied after more price data lifted optimism that the Fed is poised to cut rates, perhaps even by half a percentage point in September.
All three US benchmarks powered higher, bolstered by enthusiasm over the prospect of interest rate cuts after data this week showed that inflation was cooling faster than expected. Gains were checked by results from three major banks, which disappointed for different reasons.
Wells Fargo sank after warning it won’t be able to whittle away costs as fast as forecast, Bloomberg reported. JPMorgan missed on a few key metrics like net interest income — despite posting record profit. Citigroup said costs for the year are likely to be at the high end of the range previously provided.Still, analysts are bullish as reporting season begins.
The Fed wants to cut interest rates,” said Josh Hirt, a Vanguard senior economist. Vanguard’s baseline view is that “the Fed will find it is unable to confidently cut its target for the federal funds rate this year from its current level, a more than two-decade high of 5.25 per cent–5.5 per cent. But it’s a fine line”.
The US is not due for a “Liz Truss moment” — when the UK Prime Minister’s budget plans upended markets two years ago, sinking gilts and the pound, he told Bloomberg TV. But the Fed’s “biggest fear”, he said, is having to reverse course from a coming cycle of interest-rate cuts and hike borrowing costs again as inflation re-accelerates.
The Wall Street operations even propelled overall profits to an all-time high. JPMorgan also benefited from a one-time accounting gains on transactions related to payments network Visa.Despite the strong results, CEO Jamie Dimon maintained caution about the economic outlook.
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