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Morning Research Notes - 23.09.24
On Friday, Wall Street closed mostly flat, with the Dow Jones Industrial Average edging up slightly. Investors focused on the implications of the Federal Reserve's recent 50 basis point rate cut. At the same time, concerns about the effectiveness of the Fed's strategy to achieve a soft landing for the economy persisted, contributing to overall uncertainty and anxiety among Wall Street investors. Commodities also experienced mixed performance. Spot gold increased by 1.4%, settling at $2,621.88 per ounce. In contrast, Brent crude oil saw a slight decline of 0.2%, bringing its price down to $74.72 per barrel. Similarly, iron ore experienced a decrease of 1.2%, with its price falling to $91.55 per tonne.
Wall Street closed mostly flat on Friday, with the Dow Jones Industrial Average rising slightly by 0.09%. Meanwhile, the S&P 500 and Nasdaq Composite experienced minor declines of 0.19% and 0.36%, respectively. The market remained close to record highs reached earlier in the week, following the Federal Reserve's 50 basis point rate cut. While there was optimism regarding riskier investment opportunities, concerns about the effectiveness of the Fed's strategy for achieving a soft landing in the economy persisted, contributing to the anxiety felt by Wall Street investors. The U.S. dollar strengthened against major currencies, and utilities performed well, particularly Constellation Energy, which drove the index higher after announcing a significant partnership with Microsoft. Overall, major U.S. indexes ended the week higher, despite mixed signals from economic indicators and ongoing monetary policy discussions.
Australian markets continued their bullish streak on Friday, with the ASX200 closing 0.21% higher. This positive trend was reflected across major sectors, with Materials, Financials, Info Tech, and Utilities closing up by 0.15%, 0.36%, 0.56%, and 0.41%, respectively. Healthcare ended the day in the red, closing 0.13% lower. Commodities ended the week on a bearish note on Friday, with Aluminium, Copper, and Zinc prices falling by 0.2%, 1.82%, and 1.04%, respectively. Nickel, however, maintained its upward trend, closing 0.4% higher.
Chart of the day
The Federal Reserve's 50 basis point rate cut marks a departure from the norm, as such large cuts have historically been associated with crises or recessions. Since the late 1980s, the Fed has generally avoided drastic shifts in policy rates, opting for stability. However, data shows that in the past, significant rate cuts during non-recessionary periods have led to favorable outcomes for the S&P 500; specifically, five of the best ten years for the index occurred when the Fed was cutting rates without an accompanying recession. This historical context underscores the potential for positive market responses, despite current concerns over stretched valuations.
Source: Livewire
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