Wall Street Week Ahead: Scorching US economy throws off market's Fed cut narrative
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Robust U.S. economic data is challenging the market's expectation of Federal Reserve rate cuts. The strong growth may continue to drive stocks higher even if the Fed delivers less monetary-policy easing than anticipated. The S&P 500 is up 4% this year after surging 24% in 2023. However, evidence of the economy running too hot for the Fed to cut rates without risking inflationary rebound has jolted the narrative. The latest jobs report showed nonfarm payrolls increased by 353,000 jobs last month, well above expectations. Market expectations of a near-term rate cut have dimmed after the jobs data, with futures reflecting a 70% chance of the central bank lowering borrowing costs at its May 1 meeting. The probability of a March cut stood at about 20%. The strong growth is seen as positive for stocks, especially if accompanied by better-than-expected corporate earnings. S&P 500 earnings are expected to jump nearly 10% in 2024. However, sustained above-trend growth raises fears of an inflationary rebound and could drive Treasury yields up, which can pressure equities. Investors are still pricing in around 125 basis points of Fed cuts this year, down from around 150 basis points priced in earlier this week.

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https://m.economictimes.com/markets/stocks/news/wall-st-week-ahead-scorching-us-economy-throws-off-markets-fed-cut-narrative/articleshow/107376545.cms