Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com - Canada’s main stock exchange ticked higher on Thursday, as traders assessed the implications of a series of key central bank interest rate decisions.
The S&P/TSX composite index gained 132 points or 0.45% at 29,453.53.
On Wednesday, index rose by 0.02% to end at 29,321.66. It had earlier touched an all-time intra-day high of 29,465.14.
The Bank of Canada slashed rates by 25 basis points as expected -- its first policy action in months -- and analysts are now forecasting another drawdown in December. Later in the session, the Federal Reserve in the U.S. also rolled out a quarter-point cut.
U.S. stocks mixed
U.S. stock indexes were trading in mixed fashion as investors digested the Fed rate cut and comments on the outlook for future monetary policy from Fed Chair Jerome Powell.
At 4:00 ET (20:00 GMT), the Dow Jones Industrial Average gained 123 points, or 0.3%, while the S&P 500 index climbed 0.5% to a closing record high of 6,631.17. The NASDAQ Composite rose 0.9%.
The main averages on Wall Street ended in mixed fashion on Wednesday after a choppy session, as traders assessed the Fed’s announcement.
Further Fed cuts ahead?
The Fed lowered its benchmark federal funds rate by 25 basis points to a target range of 4.00% to 4.25%, delivering its first rate reduction since December.
Updated projections released after the meeting showed a majority of policymakers expect two more cuts in 2025, underscoring the central bank’s shift toward supporting a cooling labor market while still keeping an eye on persistent inflation.
Powell, speaking at his post-decision press conference, described the move as a “risk-management” step, saying officials wanted to guard against the possibility of a sharper rise in unemployment.
“The market is not convinced by these softest of soft-landing projections and thinks the Federal Reserve will probably need to do more with an additional 2–3 cuts now priced over and above the Fed forecasts,” ING analysts said in a note.
The decision was not unanimous. Newly appointed Governor Stephen Miran cast the lone dissent, arguing for a deeper 50 basis point cut.
His so-called “dot” on the Fed’s rate outlook was suspected to be the most aggressive, projecting rates as low as 2.875% by the end of 2025, well beneath the consensus of his colleagues.
The dissent highlighted growing debate inside the central bank over how forcefully to respond to shifting economic conditions.
With the Fed’s focus so clearly on the jobs market, the market’s attention Thursday will turn to the upcoming release of weekly initial jobless claims data.
Crude volatile
Oil prices oscillated around the flatline, as traders digested the Fed interest rate cut.
At 12.01 ET, Brent futures was down 0.78% at $67.42 a barrel, and U.S. West Texas Intermediate crude futures was lower by 0.73% to $63.57 a barrel.
Persistent oversupply and soft fuel demand in the U.S., the world’s biggest oil consumer, has weighed on the market. U.S. crude oil stockpiles also fell sharply last week as net imports dropped to a record low while exports jumped to a near two-year high, data from the Energy Information Administration showed on Wednesday.
Gold choppy
Meanwhile, gold was down 1.05% at $3,678.80 after a choppy trading period. By 07:05 ET, spot gold had moved up by 0.2% to $3,668.17 an ounce, while U.S. gold futures for December delivery fell by 0.4% to $3,702.20/oz.
The U.S. dollar pared back recent gains to remain around a two-month low, making gold less expensive for holders of foreign currencies.
Earlier, the greenback had been somewhat boosted by the Fed’s projection of two more rate cuts this year, but just one more in 2026. Powell also stressed that decisions would be taken on a meeting-by-meeting basis, a sign that an aggressive cycle of rate drawdowns may be unlikely.
“They think three more cuts will be enough to boost growth and prompt a revival in the jobs market, but the market is sceptical,” analysts at ING said in a note.
Gold has surged to all-time peaks in recent weeks, driven by expectations of monetary easing, which reduces the opportunity cost of holding non-yielding bullion, as well as geopolitical uncertainty and strong central bank purchases.