Wall Street Awaits Powell's Decision Amid Market Optimism

Wall Street's Optimistic Sentiment as Fed Rate Cut Nears

Wall Street is buzzing with optimism as investors anticipate a 0.25% cut in the Federal Reserve's interest rates. The market's upbeat mood is largely fueled by President Trump's statements regarding a potential trade deal with China and substantial gains within the tech sector. The S&P 500 index reached a record high yesterday, despite many of its constituent stocks remaining flat or declining, suggesting that a few well-placed comments from Fed Chair Jerome Powell could significantly sway the market.

A Day of Historic Reflection

Yesterday marked the 96th anniversary of Black Monday, the infamous day in 1929 when the Dow Jones index plummeted by 13%. This catastrophic event triggered a wave of frantic selling that ultimately led to an 89% loss in stock market value the following year, plunging the United States into the depths of the Great Depression.

Today's Market Landscape

In stark contrast to that dark period, today’s market is showing signs of positivity. Futures for the S&P 500 are trending upwards this morning, reflecting investor satisfaction with yesterday's market close, where the index posted a 0.23% gain and set yet another record high. Traders are particularly encouraged by President Trump's indication that he is finally ready to negotiate a deal with China, which includes discussions about Nvidia's Blackwell chips as part of that agreement.

Market Anticipation for Fed Announcement

Trading activity is largely on pause today as investors eagerly await the announcement from U.S. Federal Reserve Chair Jerome Powell, who is widely expected to confirm a 0.25% interest rate cut, reducing rates to 3.75%. The market is practically counting on this cut, as 99.9% of participants in Fed funds futures have already priced it in, according to CME FedWatch. Goldman Sachs has referred to this expectation as “the Fed put.”

“Following the ‘Liberation Day’ selloff, markets have transitioned toward a Goldilocks scenario, buoyed by improved growth expectations thanks to a resilient corporate sector and more dovish Fed outlooks stemming from a weak U.S. labor market. However, since October, this Goldilocks setup has been put to the test,” shared Christian Mueller-Glissmann and his team in their morning brief to clients. “Earlier in the month, markets began to lean more towards a ‘central bank put’ mentality.”

Market Reactions to Powell's Words

As with all Fed announcements, Powell's speech and the following Q&A session will be meticulously analyzed for specific phrases and omissions, particularly regarding the labor market and inflation trends.

Any remarks he makes are likely to impact the market significantly, particularly given the concentration of market value within a select group of tech stocks. For example, Nvidia saw a remarkable 4.98% increase in its share price after CEO Jensen Huang alleviated worries about an AI bubble, announced new partnerships with Uber, Palantir, CrowdStrike, and Nokia, and revealed that the company is venturing into quantum computing.

Interestingly, most stocks closed either flat or down yesterday, as noted by Deutsche Bank. “There were only 104 advancers in the S&P 500, marking the fewest in over two weeks and the lowest number on an up day since my records began in 1990. Quite remarkable,” reported Jim Reid and his team to their clients.

Market Snapshot Before New York's Opening Bell

• S&P 500 futures are up 0.17% this morning, following a previous session that closed up by 0.23%.
• The STOXX Europe 600