U.S. stock futures rose on Tuesday, extending the session’s gains amid rising optimism about possible interest rate cuts, while bets that Donald Trump will secure a second term also increased.
Powell expects lower inflation, boosting rate cut bets
Wall Street’s major indices closed higher on Monday, supported by optimism about the possibility of future interest rate cuts. The Dow Jones Industrial Average rose about 0.5% and closed at record highs. The S&P 500 rose about 0.3%, and the NASDAQ Composite rose 0.4%.
Federal Reserve Chairman Jerome Powell said that recent inflation readings had served to bolster the Fed’s confidence in lower inflation, raising hopes that the central bank is close to cutting interest rates.
Powell had indicated in recent days that the Fed did not have to wait for inflation to reach 2% before cutting rates. His comments generated a considerable increase in bets that the central bank will cut rates in September.
Traders were no longer estimating the likelihood of a rate hold in September and now priced in an 89% chance that the US central bank would cut by 25 basis points. According to CME Fedwatch, traders also estimate a small chance that the bank will cut rates by 50 basis points.
Trump nominates running mate, increasing presidential prospects
Wall Street shrugged off much of any political uncertainty following recent events involving Trump during a rally in Pennsylvania over the weekend.
Trump was officially nominated Monday as the Republican front-runner to begin the 2024 presidential race, and named Ohio Senator J.D. Vance as his vice presidential running mate.
Trump’s chances of victory increased considerably after recent events, as a Trump presidency presents the prospect of a looser regulatory environment in the country. Trump Media & Technology Group (NASDAQ
) soared more than 30%, but saw some consolidation in the after-market.
More bank profits
Sentiment was also supported by better than expected results from Goldman Sachs (GS), one of Wall Street’s biggest names, which added to a parade of largely positive banking results.
The banking sector will continue to be in focus on Tuesday as Bank of America (BAC), Morgan Stanley (MS) along with Charles Schwab (SCHW) will show their quarterly results before the season trading opens.
Attention will also focus on the release of US retail sales data for June.
It is expected to fall 0.3% month-on-month as consumers have to cope with high interest rates coupled with high prices.
Crude oil gives ground
Oil prices fell on Tuesday on concerns about China’s slowing economy.
The world’s second largest economy, and the world’s largest crude oil importer, experienced its slowest growth since the first quarter of 2023.
Later in the session, the American Petroleum Institute’s latest estimates of US crude inventories will be released.
