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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2022.
Brendan Mcdermid | Reuters
The S&P 500 jumped to the highest in 13 months on Monday as traders hoped the Federal Reserve will skip hiking rates when the central bank decides on policy Wednesday.
The S&P 500 gained 0.9% with gains steadily increasing throughout the trading day. The benchmark surpassed its high last August and reached the best levels since late-April 2022. The Nasdaq Composite popped 1.38% to also reach a 13-month high. The Dow Jones Industrial Average climbed 165 points, or 0.5%.
Markets have come to expect that the Fed will skip another rate increase at this week’s meeting, with traders pricing in a 74% chance that there will be no hike, according to the CME Group’s FedWatch tool. The Fed has hiked 10 consecutive times.
Tuesday’s inflation data could help reinforce the case that inflation is subsiding, as economists expect the consumer price index to show inflation dropping to a 4% annual rate in May. That’s down f 4.9% in the prior month.
The central bank will ultimately decide to skip a rate hike for June, according to Certuity co-chief investment officer Dylan Kremer, but the Fed likely isn’t done raising rates overall.
“We don’t necessarily believe that there’s no more hikes in the cards, but we do think it’s a 50/50 chance of another hike happening in this cycle,” Kremer said. “All else equal, [the CPI report] could be a short-term tailwind as markets continue to grind higher.”
However, market expectations are that Fed officials will emphasize a commitment to keep inflation at bay and come back with a final rate increase at July’s meeting before going on hold for the rest of the year. The central bank has raised rates 10 times since kicking off its tightening campaign last year.
S&P 500 since April 2022
The S&P 500 last week reached a significant milestone, gaining more than 20% off its October low. The move caused many investors to signal the bear market is over. The benchmark has been on a bit of a hot streak, gaining four weeks in a row. The Nasdaq Composite has been on an even bigger tear, up 33% from its 52-week low.
Nasdaq and technology stocks led the way on Monday again, with Amazon and Tesla each up more than 2%.
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