Market Rally Gains Momentum as Investors Eye Federal Reserve Moves

The benchmark S&P 500 and Nasdaq have approached record highs, instilling confidence among investors anticipating a possible monetary policy easing by the Federal Reserve. Despite rising underlying price pressures, the markets are factoring in job market weaknesses and changes at the Federal Reserve, leaning towards a dovish move possibly as early as September.

Speculation mounts over a 25 basis point interest rate cut, with the probability climbing from 89.2% last week, based on the CME's FedWatch Tool. Treasury Secretary Scott Bessent emphasized the likelihood of a more aggressive half-point cut given disappointing employment figures. This sentiment follows reports indicating a cooling economy, sparking concerns over inflation.

Amidst the optimistic climate, the Dow Jones rose notably, approaching an all-time high, while healthcare stocks led gains in various sectors. Investors also track geopolitical events including a Trump-Putin meeting on Ukraine. Meanwhile, the tech-led rally has pushed valuations above long-term averages, capturing investor attention.

(With inputs from agencies.)