Record S&P 500 on Weak ADP Data Fuels Fed Rate Cut Bets
The S&P 500 closed at a record 6,502.08, up 0.83%, after ADP data showed 54,000 jobs added in August, far below the 75,000 forecast. Traders saw the weak report as justification for a Fed rate cut, pushing odds for a September move to 97%. The Nasdaq Composite rose 0.98% to 21,707.69. The Dow Jones Industrial Average gained 0.77%, closing at 45,621.29.
Equities rallied across sectors, pushing the S&P 500 past previous highs. Fed rate cut expectations are building as investors price in looser policy. U.S. 10-year Treasury yields have dropped over 0.33% this year, while volatility remains near three-year lows.
Despite concerns over debt, deficits and political pressure, the bond market has stayed calm. Analysts warn that renewed quantitative easing could be considered under political pressure. Stephen Jen of Eurizon SLJ Capital and Pimco’s Michael Cudzil suggest the Fed may reinvest maturing mortgage-backed securities or adjust bond issuance. Market watchers caution that any fiscal inaction could test investor patience, potentially triggering higher yields.
Bullish
Fed rate cut expectations signal a shift toward looser monetary policy and increased liquidity. Historically, lower interest rates and falling Treasury yields have boosted risk assets, including cryptocurrencies. For instance, in 2020 and 2021, Fed easing drove Bitcoin and Ethereum to new highs. In the short term, traders may flow into crypto markets seeking yield, lifting prices. However, long-term stability will depend on whether the Fed maintains its easing path without triggering inflationary pressures or policy reversals that could lead to volatility.