Soaring corporate earnings propel U.S. stock exchanges higher
The U.S. stock markets reached record highs at the end of the week, driven by positive corporate earnings reports and expectations of rate cuts. However, the Federal Reserve's decision on interest rates in September remains uncertain.
Traders are pricing in a 90 percent chance that the Fed will cut rates by 25 basis points in September. This speculation has boosted the Wall Street at the end of the week. Yet, the confirmation of President Donald Trump's nominee, Stephen Miran, to the Fed's board is pending, and it's uncertain how his views will influence the Fed's decisions.
Miran, a top White House economic adviser, is Trump's recent nominee to fill a vacant Federal Reserve Board seat left by Adriana Kugler's resignation. His appointment is temporary, pending Senate confirmation, and he would serve until January 31, 2026, while Trump continues searching for a permanent appointee.
Miran supports Trump's economic positions such as tax cuts and tariff policies, which differ from Chair Jerome Powell’s cautious approach on rate hikes given inflation risks. Trump's broader conflict with Powell involves calls for rate cuts to ease economic costs, but Powell has maintained rates between 4.25% and 4.5% to contain inflation.
Investors are keeping an eye on personnel changes at the Fed, as a reshuffle could lead to a more accommodative monetary policy. Meanwhile, the dollar index fell 0.2%, due to the nomination of Miran, who has advocated for stronger presidential control of the Fed, according to Danske Bank.
Elsewhere in the markets, the gold price hit a new record high above $3,500, but then gave up all its gains, with the White House stating it would clarify "misinformation" about gold tariffs in a new publication soon. The gold price per ounce was little changed at $3,398, with a weekly gain of almost 3%.
After six consecutive trading days of declines, oil prices stabilized, with Brent and WTI prices being little changed. On the bond market, yields ticked up slightly after weak demand for the previous day's long bond auction. The 10-year yield was 2 basis points higher at 4.28%.
Apple gained 4% on Friday, resulting in a weekly gain of 13.3%, the most since 2020, after Trump announced that Apple would invest another $100 billion in the US, bringing the total for the next four years to $600 billion.
In the tech sector, Pinterest disappointed investors with slower user growth, causing the stock to fall 10.3%. Meanwhile, Expedia rose 4.1% and Tripadvisor gained 14%, after both online travel agencies reported positive earnings and expressed optimism about the recovery in US travel demand.
However, the uncertainties surrounding the Fed's interest rate decision and the potential impact of personnel changes continue to loom over the markets. The Federal Reserve is expected to lower interest rates at their next meeting in September, due to a weak monthly jobs report and disappointing economic data. But the board’s independence and internal dynamics remain complex amid political pressures.
The proposed investment of $100 billion by Apple in the US, announced by President Donald Trump, has boosted the stock market, particularly Apple's shares. This move contributes to the total investment of $600 billion in the US over the next four years.
In light of the upcoming Federal Reserve Board meetings and potential changes in personnel, investors are heavily reliant on the Fed's decisions regarding investing, finance, and the stock-market, especially the rate cuts and monetary policy.
