Stocks rose and the dollar declined on Tuesday as investors increased bets the Federal Reserve will begin cutting interest rates this year following weaker-than-expected U.S. economic data. the shift in expectations reflects growing optimism that the Fed will prioritize supporting economic growth over continuing too combat inflation.
The Dow Jones Industrial Average climbed 148.13 points, or 0.4%, to close at 38,503.06, while the S&P 500 gained 0.7% to 5,026.62. The Nasdaq Composite advanced 1.3% to 15,973.57. The dollar index, which measures the greenback against a basket of major currencies, fell 0.6% to 103.82. These moves signal a broader market sentiment shift,impacting everything from corporate earnings to international trade.
The catalyst for the rally was a report showing U.S. job openings fell in January, alongside weaker-than-expected data on January durable goods orders. The job openings data indicated a cooling labor market,fueling speculation the Fed might potentially be closer to achieving its goals of price stability and full employment.
“The market is interpreting this data as a sign that the fed will be able to cut rates sooner rather than later,” said Michael Green, portfolio manager at Simplify Asset Management. “that’s a positive for risk assets like stocks.”
Treasury yields fell across the board, with the 10-year yield dropping to 4.17%. Lower yields make stocks more attractive relative to bonds.Investors are now pricing in a roughly 30% probability of a rate cut by the Fed’s March meeting, up from less than 20% a week ago, according to the CME FedWatch tool.
energy stocks lagged,as oil prices fell on concerns about demand.West Texas Intermediate crude oil futures settled down 1.8% at $76.49 a barrel.
Looking ahead,investors will be closely watching upcoming inflation data and comments from Fed officials for further clues about the timing and pace of potential rate cuts. The next key data release is the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, due later this month.
