Wall Street Hopes for Clarity from Fed Decision – Stocks Increase Significantly

The stock market experienced a positive week with solid gains as investors eagerly anticipated the upcoming interest rate decision by the U.S. Federal Reserve (Fed). The central question remains whether the Fed will cut rates by 25 or 50 basis points. The tech-heavy Nasdaq Composite rose by approximately 6% over the past week, marking its best week of the year. The S&P 500 increased by 4%, and both indexes closed Friday with gains for the fifth consecutive day. The Dow Jones Industrial Average also posted a weekly gain of around 3%. This upward movement occurred against the backdrop of evolving expectations regarding whether the Fed will implement a moderate rate cut of 25 basis points or a more substantial cut of 50 basis points. It would be the Fed's first rate reduction since early 2020. Former top officials, such as Bill Dudley, former president of the New York Fed, favor a deeper rate cut to support a soft landing for the economy. Aside from the Fed decision, investors are also focusing on consumer data, with retail sales for August expected on Tuesday, as well as on the housing market, which is benefiting from a decline in mortgage rates. Additionally, upcoming quarterly earnings reports from companies such as FedEx, General Mills, Lennar Corporation, and Darden Restaurants are in the spotlight. The figures from FedEx are of particular interest, as they are often seen as an indicator of the broader U.S. economy's health. On Friday, the probability of a 50-basis-point rate cut rose to approximately 49%, according to the CME FedWatch Tool. Moreover, the Fed's monetary policy update on Wednesday will provide insights into future rate movements, including the so-called "Dot-Plot" projections. Overall, the markets may react with volatility regardless of the Fed's decision, with the subsequent press conference by Fed Chair Jerome Powell being crucial for clarifying future monetary policy. Additional economic data, such as retail sales and labor market numbers, will also be closely watched to identify signs of the resilience of consumer spending.