The S&P 500 ended a three-day losing streak, buoyed by a decline in US Treasury yields and a more dovish tone from the Federal Open Market Committee (FOMC), according to Deutsche Bank’s Early Morning Reid team [1]. Despite strong US economic data and earlier upward pressure on yields, the market now assigns a much lower probability to an additional Federal Reserve rate hike in October, which has supported US equities ahead of the upcoming jobs report [1].
US equities recovered from their earlier sell-off, with the S&P 500 closing up by 0.19%. Futures for the index were also up by 0.27% the following morning, indicating continued positive sentiment [1]. In contrast, European assets struggled during the same period [1].
The probability of an October Fed rate hike dropped to 30% by the close of the previous day, down from 37% on Wednesday and 70% on Monday. This shift followed comments from New York Fed President Williams, who signaled no urgency for the next rate hike [1].
The more dovish FOMC commentary and the resulting pullback in yields have been key drivers in supporting US equities, particularly the S&P 500, as investors reassess the likelihood of further monetary tightening [1].
CONCLUSION
The S&P 500's rebound reflects investor optimism following dovish signals from the Federal Reserve and a notable decline in rate hike expectations. With the probability of an October hike dropping sharply, US equities have found renewed support, setting a positive tone ahead of the upcoming jobs report.