U.S. markets and stock exchange traded funds inched higher Monday as traders on a highly anticipated Federal Reserve meeting that is expected to outline the potential path to interest rate cuts this year.
On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.7%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) gained 0.2% and SPDR S&P 500 ETF (NYSEArca: SPY) rose 0.2%.
Investors will be closely monitoring the Fed’s meeting concluding Wednesday for direction on the central bank’s monetary policy for the year after rising expectations for an interest rate cut in recent weeks. Meanwhile, the Bank of Japan and Bank of England will also hold policy meetings this week as well, the Wall Street Journal reports.
U.S. stocks have been rallying after Fed Chairman Jerome Powell hinted that the central bank would act to prop up the U.S. economic expansion in light of escalating geopolitical and trade tensions that have weakened the growth outlook.
“Investors are thinking that the Fed’s going to come out with some dovish language Wednesday,” Tracie McMillion, head of global asset allocation at Wells Fargo Investment Institute, told the WSJ. “That would give markets maybe an additional boost.”
The markets anticipate a cut in interest rates as early as July.
“Most people do not think that there will be a rate cut day after, but they do not want to jump in and make any major asset reallocations until they get more guidance from the Fed,” Mayra Valladares, managing principal at MRV Associates, told Reuters. “Investors want to see what language Fed officials use about recent economic data to see if the data will influence the Fed to cut rates later in the year.”
Meanwhile, investors continued to watch for signs on how the U.S. trade battle with China will affect the domestic economy. On Monday, the Office of the U.S. Trade Representative will open seven days of public hearings on the Trump administration’s proposal to raise tariffs on $300 billion in Chinese exports, which include major consumer goods like mobile phones and laptops.
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