S&P 500, Nasdaq hit record highs at open on September rate cut hopes

NEW YORK - Wall Street’s main indexes opened higher on Aug 13 with the benchmark S&P 500 and the Nasdaq hitting record highs, underpinned by growing optimism that the Federal Reserve could restart its monetary policy easing cycle in September.

The Dow Jones Industrial Average rose 112.9 points, or 0.25 per cent, at the open to 44571.53.

The S&P 500 rose 16.9 points, or 0.26 per cent to 6462.67​, while the Nasdaq Composite rose 82.6 points, or 0.38 per cent, to 21764.548.

Equity markets are swept up in a risk-on rally as a so-far modest rise in US goods prices has tempered fears over the impact of tariffs. The data has bolstered bets that the Fed will resume rate cuts next month and act more aggressively to shield a labour market showing signs of strain.

Optimism over a softening rate stance is further buoyed by easing global trade tensions and a significantly stronger-than-expected US earnings season.

“The bull case remains a convincing one, with earnings growth solid, and a cooler tone on trade continuing to prevail, all the while dovish policy expectations help to provide a cushion against any worries that the economy may be softening,” said Mr Michael Brown, senior research strategist at Pepperstone.

Swaps are pricing in about a 95 per cent chance of a quarter-point cut in September, up from about 80 per cent before the inflation data on Aug 12, with at least three more similar moves expected by June.

US Treasury Secretary Scott Bessent told Bloomberg TV that rates should likely be 150-175 basis points lower. “We could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,” he said.

US equities have staged an astonishing rebound from their April lows, when US President Donald Trump’s tariffs upended markets. The S&P 500 is closing in on a 10 per cent advance for the year, with most of the fresh gains coming in the past two months.

The volatility that has defined much of this year’s trading has eased, with the Cboe Volatility Index – Wall Street’s fear gauge – falling to its lowest level since December. Treasury market swings have also subsided, as the ICE BofA MOVE Index, a measure of expected yield fluctuations, dropped to its lowest since January 2022.

“Quite simply there is a momentum drive higher here,” said Mr Guy Miller, chief market strategist at Zurich Insurance Co.

“The US economy is in stronger shape than many had expected and the risk of recession is continuing to diminish. Markets can go even higher.” REUTERS, BLOOMBERG