LIVE MARKETS-Wall Street gets boost from rate cut prospects

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WALL STREET GETS BOOST FROM RATE CUT PROSPECTS

The S&P 500 index .SPX and the Nasdaq .IXIC are marching higher early on Wednesday, after hitting record peaks at the open, bolstered by expectations that the Federal Reserve will finally resume cutting interest rates at the September policy meeting.

The rate futures market has nearly fully priced in a 25 basis-point rate cut next month, with a roughly 3% chance of a 50-bp easing following U.S. Treasury Secretary Scott Bessent's call for such on Fox News on Tuesday and Bloomberg TV on Wednesday.

Rate futures are now factoring in 65 bps of cuts by the end of the year, up from about 60 bps last week.

Bessent on Wednesday says the Fed's benchmark rate should have been 150-175 bps lower right now, noting that had there been correct numbers for U.S. nonfarm payrolls, the central bank would have cut at the June and July meetings.

He adds that it's a mistake for the Fed to be data-driven and it could be the reason why it has been behind the curve. Bessent notes that the Fed should be more forward-looking, citing the Alan Greenspan era.

All these comments are helping boost stocks, although some analysts say future gains could be limited.

"While we believe it still makes sense to stay invested (in stocks), much of this year's gains are likely already in, and we would not be surprised to see stocks trade in a sideways pattern for the coming months," writes Rich Mullen, founding partner and CEO at Pallas Capital Advisors.

"Stocks tend to see corrections in the early fall months, and while seasonal trends are by no means set in stone, we encourage investors to be vigilant and lookout for pullbacks, which can create good entry points for investors who are holding too much cash."

Investors are now positioning and looking ahead to Friday's talks between U.S. President Donald Trump and Russian President Vladimir Putin, a meeting in which the goal is to try to end the Russia-Ukraine war.

Here's an early snapshot of financial markets:

(Gertrude Chavez-Dreyfuss)

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