Wall Street’s main indexes fell at the beginning of the 2024 year as investors locked in profits after a very successful 2023 and are currently waiting for the Federal Reserve’s meeting that could offer hints on its interest rate path. Ken Polcari, managing partner at Kace Capital Advisors, said:
“The decline yesterday, today, and maybe for the next couple of weeks, is a result of people locking in profits and reconsidering what the narrative is – are rates going down five or six times as it appeared to be at the end of last year?”
The Fed’s December meeting minutes are set to be disclosed at 2:00 p.m. ET, potentially providing information regarding the central bank’s shift toward reducing interest rates. Although it’s widely anticipated that the Fed will keep interest rates unchanged this month, traders have priced in a 65.7% probability of a 25 basis point rate reduction in March, according to CMEGroup’s FedWatch tool.
See Related: Wall Street’s Main Indexes Surged Significantly After The Release Of Lower Than Anticipated Inflation Figures
Central Bank And Inflation
Richmond Fed President Thomas Barkin, a voting member in the FOMC’s rate-setting committee, said recently that the U.S. central bank is “making real progress” towards taming inflation and a soft landing seeming “increasingly conceivable”. Encouragingly, the American Association of Individual Investors (AAII) Sentiment Survey indicated a surge in optimism among individual investors regarding the short-term outlook for the U.S. stock market, reaching its peak level in more than two and a half years.
Despite this, JPMorgan Asset Management advises investors to be cautious due to potential recession risks. At the same time, analysts at Société Générale anticipate a turbulent 2024 for U.S. stocks, projecting fluctuations that could involve nearing recent highs, encountering declines, and subsequently rebounding.
This week will witness a series of labor market data releases, culminating in the government’s December employment report on Friday. These reports could significantly influence the forecast for the Fed’s interest rate trajectory this year, prompting investors to scrutinize the data. Jeffrey Roach, chief economist at LPL Financial, added:
“The job market is cooling and we should see confirmation of that in this Friday’s jobs report”
Following the progress of Wall Street’s main indexes seen last year, investors are still optimistic about the prospect of another robust year ahead. This optimism is rooted in the anticipation that a decelerating economy will result in a gentle landing rather than a full-scale recession, especially as the Fed initiates rate cuts in the first half of 2024.
