US market ends positive, notches third consecutive day of positive gains

US stock market: US stock indexes concluded Monday on a positive note, marking their third consecutive session of gains. Investors remained optimistic about the possibility of the Federal Reserve implementing interest rate cuts later this year.

Initial concerns regarding the likelihood of rate cuts had surfaced earlier in the year as inflation proved resilient, prompting a dip in the markets in April. However, recent data showing a slowdown in US job growth for April relieved some pressure on the Federal Reserve to maintain higher rates. This, coupled with better-than-expected corporate earnings, fueled renewed positivity among equity investors in recent sessions.

Last week, the Federal Reserve hinted at potential future reductions in borrowing costs but underlined the importance of gaining "greater confidence" in declining inflation before implementing rate cuts. Richmond Fed President Thomas Barkin echoed this sentiment, suggesting that the current interest rate level should sufficiently cool the economy to bring inflation back to the central bank's 2 per cent target. He highlighted that the robust job market allows policymakers the luxury of time.

Barkin, a voting member on interest rate policy this year, cited fluctuating inflation data as supporting the Fed's cautious approach to interest rates.

Meanwhile, New York Federal Reserve Bank President John Williams acknowledged the possibility of rate cuts but maintained that monetary policy was currently in a favorable position.

Jason Pride, Chief of Investment Strategy & Research at Glenmede, noted that much of the market's recent movements reflected attempts to understand differing perspectives on inflation and rates.

Traders are currently factoring in potential rate cuts totalling 46 basis points by the end of 2024, with the first cut anticipated in September or November, according to LSEG's rate probability app.

In terms of market performance, the S&P 500 gained 52.91 points, or 1.03 per cent, closing at 5,180.70 points, while the Nasdaq Composite rose by 191.55 points, or 1.19 per cent, reaching 16,347.88. The Dow Jones Industrial Average increased by 175.34 points, or 0.45 per cent, ending at 38,851.02.

The majority of S&P 500 sectors ended the day in positive territory. The energy sector was among the top gainers, partially attributed to the surge in US natural gas futures.

As earnings season unfolds, investors are closely monitoring quarterly reports from major firms such as Walt Disney and Uber. Thus far, a significant percentage of S&P 500 companies have exceeded profit estimates.

Looking ahead, companies like Arm Holdings and Micron Technology are scheduled to report earnings this week. Paramount Global saw an uptick after ending exclusive negotiations with Skydance Media, while Tyson Foods experienced a dip despite surpassing profit expectations due to concerns about inflation's impact on consumers.

Meanwhile, Spirit Airlines faced a decline in its stock value following a weak revenue outlook for the second quarter.

(With Reuters inputs)