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Wall Street Rally Cools as Fed Decision Looms: U.S. Stock Market Review

The Wall Street rally takes a pause, with investor focus now on the forthcoming Federal Reserve meeting and inflation data.

Wall Street sign
Wall Street sign

Momentum Pauses Following S&P 500's Remarkable Rally

U.S. stock index futures witnessed a slight dip on Friday, following a day when the S&P 500 celebrated a 20% climb from its lows, signaling the onset of a fresh bull market. This rise is a sharp turn-around from the October 12 closing low, marking an inflection point for many market watchers.

The Tech Rally and the End of Fed's Rate Hiking Cycle

The Nasdaq and S&P 500 have set new year-to-date records, propelled by a surge in mega-cap stocks driven by artificial intelligence, a robust earnings season exceeding expectations, and speculation that the Federal Reserve is approaching the end of its cycle of rate hikes.

Market Anticipation: Will the Fed Maintain Current Interest Rates?

According to the Fed watch tool by CME Group, Fed fund futures are indicating a 76% likelihood that the U.S. central bank will maintain interest rates at the current 5% to 5.25% range in its policy meeting slated for June 13-14.

Consumer Price Data and the Expectations for a July Rate Hike

Investors are looking forward to the consumer price data due on Tuesday, as it will significantly influence expectations of the Fed's next steps. Current market sentiment is poised at a 50% probability for a 25-basis-point-rate increase in July.

The Plunge of Wall Street's Fear Gauge Amid Economic Resilience

With signs of a robust U.S. economy and prospects of the Fed suspending its rigorous monetary tightening, volatility measures have plummeted. Wall Street's "fear gauge," the CBOE Volatility Index, dropped to a new pre-pandemic low of 13.53 points on Thursday.

A Close Call for Fed's June Decision Amid Hawkish Pressure

Economists at BNP Paribas speculate that the June decision may be tight, and the committee may raise rates in June and July if Fed Chair Jerome Powell fails to appease the hawkish investors. However, they also forecast that weakening economic activity and employment data will prompt a more enduring pause in monetary policy by September.

Tech Stock Pressures and the Rising Yield on Treasury Notes

The yield on two-year Treasury notes, reflecting short-term rate expectations, has continued to increase, trading at 4.55%, thereby putting pressure on high-growth stocks. Tech giants like Apple, Amazon, and Microsoft saw a decrease in premarket trading.

General Motors logo
General Motors logo

Electric Vehicle Shares See Fluctuations Following GM's Announcement

Tesla's shares jumped 4.4% after General Motors announced they would adopt Tesla's North American charging plug standard and allow GM's electric vehicle buyers to use Tesla's Supercharger network. This news increased GM's shares by 3.7%, while shares of charging companies EVgo and ChargePoint tumbled by over 4%.

Dow E-minis Slip and Target Corp Faces Downgrade

At 5:58 a.m. ET, Dow e-minis were down by 75 points, or 0.22%, while S&P 500 e-minis and Nasdaq 100 e-minis fell by 6.25 points (0.15%) and 5.75 points (0.04%), respectively. In other stock news, Target Corp saw a 1.2% decline after Citi downgraded the retailer to "neutral" amidst concerns of a tough macroeconomic environment potentially impacting sales.