Wall Street Climbs on Renewed Hopes of Fed Rate Cuts

WALL STREET - NEW YORK. U.S. stock indexes extended last week's gains on Monday as investors saw a greater chance of the Federal Reserve cutting interest rates this year following softer-than-expected payrolls data on Friday.

The benchmark S&P 500 and the tech-heavy Nasdaq were trading at three-week highs after data on Friday showed U.S. job growth slowed more than expected in April, taking pressure off the U.S. central bank to keep rates higher for longer.

"The economic news has been just right. It's still eliciting signs of underlying strength in the economy that should allow earnings growth to continue to foster an environment where stock prices can advance," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"At the same time, it is not running so hot as to once again threaten the Fed's current posture."

Traders are currently pricing in rate cuts worth 46 basis points from the Fed by the end of 2024, with the first cut expected in September or November, according to LSEG's rate probability app.

Read Also: EU Clears $14.9 Billion Purchase of U.S. Steel by Japan's Nippon

In recent weeks, traders had priced in just one cut due to signs of sticky inflation. But a much better-than-expected first-quarter earnings season and hopes of U.S. monetary policy easing have drawn buyers back into the market, and somewhat stabilized U.S. stock indexes after a rocky April.

The Fed signaled last week it was leaning toward eventual reductions in borrowing costs, but wants to gain "greater confidence" that inflation will continue to fall before cutting rates.

Richmond Fed President Thomas Barkin and his New York counterpart John Williams are scheduled to speak later in the day, kicking off speeches from a host of U.S. central bank policymakers this week.

With the earnings season in full swing, investors will also keep an eye on quarterly numbers from major firms including Walt Disney, Uber and Arm Holdings this week.

Of the 397 firms in the S&P 500 that have reported earnings through Friday, 76.8% beat analysts' profit estimates, compared with the long-term average of 66.7%, as per LSEG data.

Read Also: Oil Climbs as Gaza Tensions Rise, Saudi Arabia Hikes Prices

At 11:23 a.m. ET, the Dow Jones Industrial Average rose 57.20 points, or 0.15%, to 38,732.88, the S&P 500 gained 29.54 points, or 0.58%, to 5,157.33 and the Nasdaq Composite gained 108.37 points, or 0.67%, to 16,264.70.

Nine of 11 S&P 500 sectors traded higher. The energy index rose 1.3%, helped by higher crude prices.

Chipmakers also rose, with Micron Technology gaining 4.2% after a report said Baird upgraded the stock.

Paramount Global added 3.1% after the media company ended its exclusive negotiations with Skydance Media without a deal, allowing the special committee to entertain other offers from rival bidders.

Tyson Foods fell 7.5% after the meatpacker surpassed Wall Street expectations for second-quarter profit but warned that consumers were under pressure from persistent inflation.

Advancing issues outnumbered decliners by a 3.55-to-1 ratio on the NYSE and a 1.85-to-1 ratio on Nasdaq.

The S&P 500 posted 26 new 52-week highs and no new lows, while the Nasdaq recorded 110 new highs and 29 new lows.