US large-cap indexes moved to record highs as investors celebrated the kick-off to what many expect to be a prolonged Fed rate-cutting cycle. The rally was also relatively broad, with the smaller-cap indexes outperforming (+9% on the week for the Russell 2000 index), although they remained below previous peaks. The initial reaction to the Fed’s jumbo rate cut was relatively muted. Indeed, investors’ celebration of the news seemed to begin on Thursday morning, with the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite all surging to new highs. The week’s economic data arguably had an upbeat overall tone, leading critics of the Fed’s decision to argue that policymakers had moved too decisively. On Tuesday, the Commerce Department reported that retail sales had risen 0.1%, which was more than expected and which followed an upwardly revised jump of 1.1% in July. Meanwhile, building permits rose 4.9% in August, their biggest monthly gain in a year and taking them back to their highest level since March. Bond yields rose modestly in wake of the Fed decision while credit spreads tightened. In Europe, the BoE left rates unchanged. The pan-European STOXX Europe 600 Index ended 0.33% lower, as the rally triggered by the U.S. Federal Reserve’s interest rate cut faded on Friday and investors grew cautious about the outlook for monetary policy. The dollar was unchanged, oil rallied, gold hit new all time high while bitcoin surged above $63k.
Have a great week-end
Charles for the team