US stocks experienced a broad decline on Tuesday, with the Dow Jones Industrial Average recording its longest losing streak in 46 years. This downturn suggests that key sectors are not sufficiently contributing to sustain a holiday rally, particularly against a perceived hawkish stance from the Federal Reserve. US stocks weakened as traders analyzed a robust retail sales report, which followed a strong update from S&P Global's services sector.
This highlights the impact of the Federal Reserve's upcoming decisions. There is palpable tension within the Fed and Wall Street as Chair Jerome Powell addresses a hotter-than-expected US labor market and stubbornly high inflation rates. These factors contrast with global uncertainties but may compel Powell and his team to adjust their monetary policy approach, potentially in a hawkish direction. Investors eagerly await the Fed's Summary of Economic Projections and Powell's insights during the post-meeting press conference, which are expected to offer clues about a potential reduction in policy easing. However, signs of a potential soft landing in the US economy are becoming increasingly evident, indicated by robust macroeconomic data and indications of an increase in profit growth as we look towards 2025. While the prevailing market sentiment suggests that further rate cuts and strong earnings growth will occur simultaneously, these elements are not necessarily interconnected. Nevertheless, a growing sense of caution exists among market participants regarding the feasibility of additional monetary easing, driven by persistent core inflation and robust consumer spending. This trepidation underscores the delicate balance the Fed must maintain as it navigates these economically favorable times. A quarter-point rate cut by the Federal Reserve is widely anticipated, but the course beyond remains uncertain
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