Stock Rally Pauses as Fed Uncertainty Lifts Yields – US Market Wrap

A rally that had put stocks on the verge of all-time highs stalled, and bond yields rose as optimism about Federal Reserve rate cuts faded ahead of a key inflation reading.

While Powell signalled on Friday that a September rate cut is likely amid downside risks to jobs, Wall Street remained sceptical about the pace of those cuts. In addition to the division among officials, traders are bracing for a disappointing price reading later this week.

Policymakers face challenges such as rising inflation and a weak labour market. That unsettling reality, which pushes policy in opposing directions, is exacerbated by a high level of uncertainty about how each of these factors will evolve in the coming months.

Last month, the personal consumption expenditures price index, excluding food and energy, increased by 2.9% compared to the previous year, according to the Fed’s preferred measure of inflation. That would be the fastest annual rate in five months.

Almost 400 S&P 500 shares fell, bringing the index down 0.4%. Nvidia accelerated gains in megacaps ahead of its results. The yield on 10-year Treasuries increased three basis points to 4.28%. The dollar rose.