Wall Street hits new record after Fed minutes, CPI eyed next

Fed minutes add little clarity 

The minutes of the Federal Reserve’s September policy meeting published on Wednesday did little to end the uncertainty about the pace of rate reductions over the coming months. Policymakers were divided over whether 50 basis points was the appropriate size to begin the rate-cutting cycle and while a “substantial majority of participants” supported the move, it seems that some may have done so reluctantly.

Fed officials were also keen to stress that September’s outsized cut should not be interpreted as a signal for rapid policy easing. Nevertheless, the somewhat less dovish-than-anticipated minutes did not spark much reaction in the markets, with expectations of a 25-bps rate cut in November falling only slightly.

Equity markets remain upbeat

Shares on Wall Street briefly dipped after the minutes before recovering to finish the session higher. The S&P 500 closed at a new all-time high, suggesting investor confidence is high as traders enter the Q3 earnings season, which gets into full swing on Friday with the major bank earnings.

Nvidia has been a key driver of the latest upswing on Wall Street amid strong demand for its new Blackwell AI chip. But its stock closed lower on Wednesday as the rally paused for breath. Google parent, Alphabet, also bucked the broader market trend as ongoing worries about the US government’s efforts to split the business continue to weigh on the stock.

Globally, the bullish sentiment has been bolstered lately by China’s latest stimulus policies. After the disappointment about the absence of any new measures in Tuesday’s press briefing, investors are hopeful there will be more details in the next scheduled announcement this Saturday. Specifically, markets want to see how Beijing will use fiscal policy to boost the economy, and in particular, the property sector.

Dollar steady ahead of CPI report

In forex markets, the US dollar was trading flat near two-month highs against a basket of major currencies, as the climb in Treasury yields slowed. Against the yen, the greenback settled in the 149 region after reclaiming the handle yesterday.

Markets are likely to stay in consolidation mode until the release of the US CPI report at 12:30 GMT. The data is expected to show a drop in the headline figure to 2.3% but no change in core CPI at 3.2%. Any significant upside surprises that make a rate cut in November less likely could push the dollar even higher while putting an end to the rally in US equities.

Gold halts decline, oil on alert for Israel’s next move

Such a scenario would also be negative for gold, which has just managed to halt a week-long slide. The precious metal has been in a slow retreat as the dollar recovers from its late September lows. Heightened tensions in the Middle East have provided some support, but for oil, there’s been a sharp pullback this week as Israel weighs its response to the recent Iranian attack.

Oil futures are slightly higher today, but a resumption of the pullback is likely unless Israel carries out its planned retaliatory strike in the coming days.