Wall Street futures pause as markets eye cautious Fed

The Federal Reserve recently announced that it now projects just one interest rate cut this year, compared to its previous expectation of three cuts in 2024. This change in projection comes as the central bank continues to assess the cooling economy and inflation pressures. Despite the adjusted outlook, markets still anticipate a rate cut in September, with interest rate traders pricing in about two cuts by the end of the year.

The S&P 500 and Nasdaq achieving record closing highs for the fourth consecutive session can be attributed to several factors:

1. Technology shares rally: The information technology sector, which has a significant weighting in both the S&P 500 and Nasdaq, experienced a rally, driving the indices higher.

2. Softened inflation pressures: Data from May showed that inflation pressures had eased, leading to hopes that the Federal Reserve might consider cutting interest rates in the near future.

3. Unemployment claims increase: The number of Americans filing new claims for unemployment benefits increased to a 10-month high, which further supported the case for an upcoming interest rate cut by the Federal Reserve.

4. Chip stock rally: A rally in chip stocks, led by Broadcom, contributed to the overall strength in the technology sector, which in turn boosted the S&P 500 and Nasdaq.

5. Market expectations for rate cuts: Despite the Federal Reserve dialing back its projections for interest rate cuts this year, markets remain optimistic, with a 72% chance of a cut in September and about two cuts expected by the end of the year, according to CME's FedWatch tool.

In summary, a combination of strong technology sector performance, easing inflation pressures, increased unemployment claims, a rally in chip stocks, and market expectations for future rate cuts contributed to the S&P 500 and Nasdaq achieving record closing highs for the fourth consecutive session.