S&P 500 Holds Near Record Amid Fedspeak

Charles Tan, CIO at American Century Investments, discusses the impact of Trump's H-1B Visa fee and where he sees opportunity across fixed income.

Wall Street traders left stocks hovering near all-time highs as bonds halted a four-day slide ahead of Federal Reserve Chair Jerome Powell’s first public remarks since officials cut rates last week.

Action was muted across markets, with traders parsing a host of comments from other Fed speakers. Policymakers have been debating how much further to lower borrowing costs after delivering the first reduction since December.

Following a series of records that sent the S&P 500 near 6,700, the US equity benchmark barely budged. Treasury 10-year yields declined one basis points to 4.14%. The dollar wavered. The crypto world stabilized after a rout. Gold held its record.

Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates last week. Policymakers are penciling in two more quarter-point cuts this year, according to the median of their projections published after the meeting.

“Fedspeak this week will highlight the wide dispersion of views on the Committee,” said Oscar Munoz at TD Securities. “We do not expect Powell to change his tone from his FOMC press conference.”

Fed Governor Michelle Bowman said officials need to act decisively to bring down rates as the labor market weakens. Fed Bank of Chicago President Austan Goolsbee told CNBC the US central bank should be cautious given inflation is  on an upward trajectory.

In economic news, US business activity expanded in September at the slowest pace in three months, while cooler demand limited the ability of companies to raise prices and offset tariffs.

“We’ll hear from Fed Chair Powell as well today, but given there haven’t been material data developments since last week’s press conference, our US economists expect his tone to align closely with his remarks last week,” said Deutsche Bank strategists including Jim Reid.

Looking ahead at the outlook for additional rate moves, Powell was cautious last week, saying the Fed was now in a “meeting-by-meeting situation.”

“Chair Powell’s appearance this afternoon is unlikely to provide much new information since last week’s press conference,” said Will Compernolle at FHN Financial.

Compernolle said Tuesday’s $69 billion sale of two-year notes will test the durability of the recent selling pressure in the belly of the curve.

That’s the first in a trio of auctions this week that also include offerings of $70 billion five-year notes Wednesday and $44 billion seven-year notes Thursday.

“Our baseline is for the auction to show strong demand and for intermediate yields to pick up some downward momentum,” he said.

Anthony Saglimbene at Ameriprise noted that since May, the 10-year Treasury yield has been on a bumpy decline, and the S&P 500 has posted strong gains over the same period.

Simply, lower rates make future corporate earnings more attractive when discounted to their present value — supporting higher equity valuations.

“Lower discount rates increase the present value of future cash flows for companies, making equities more appealing relative to fixed income alternatives, all else equal,” Saglimbene added.

Prospects of further rate cuts, surprisingly strong profit growth and enthusiasm for Big Tech companies that are capitalizing on artificial intelligence have all kept equities near their all-time highs.

The record-setting advance has pushed the S&P 500 nearly 3% above the average year-end forecast among those tracked by Bloomberg, which currently stands at 6,486. Only in 2024 and 1999 have the analyst calls lagged the market’s actual return so much around this time of the year.

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