Optimism Returns to Risk Assets as Geopolitical Tensions Ease and Fed Rate Cut Prospects Loom
The Wall Street stock markets experienced a resurgence, nearing record highs, as investors anticipate potential interest rate cuts by the Federal Reserve (Fed) amid a more contained geopolitical situation in the Middle East.
Nasdaq Composite and S&P 500 Approach Historical Peaks
The Nasdaq Composite rose by 0.97% to 20,167.91 points on Thursday, just 0.03% away from a new all-time closing high set on December 16, 2024 at 20,173.89 points.
The S&P 500 gained 0.80% to 6,141.02 points, only 0.05% from an unprecedented level, with its last record on February 9 at 6,144.15 points.
Dow Jones Industrial Average Also Rises, but Remains Below Its Historical Maximum
The Dow Jones Industrial Average increased by 0.94% to 43,386.84 points but is still 3.61% away from its historical maximum.
Bank Stocks Perform Well Following Fed’s Proposed Relaxation of Leverage Rules
Bank stocks outperformed after the Fed proposed easing its leverage rules, which would reduce the capital large banks must hold against relatively low-risk assets.
Economic Data and Geopolitical Developments Fuel Market Momentum
Analysts from Bx+ highlighted that the primary stock indices were driven by economic data supporting expectations of Fed rate cuts and the potential replacement of Jerome Powell with a more accommodative monetary policy profile.
Experts from Actinver noted that markets traded optimistically, consolidating monthly gains and positioning for a positive close in the month.
These factors countered pressures from the updated U.S. GDP growth data for Q1 2025, which fell short of forecasts due to lower-than-expected consumer spending and rising jobless claims.
Mexican Stock Markets Advance for Third Consecutive Day
Both Mexican stock exchanges closed with gains on Thursday, driven by the Banco de México’s monetary policy announcement.
The S&P/BMV IPC, the leading index of the Mexican Stock Exchange (BMV), rose 0.95% to 57,474.19 units, accumulating its third consecutive day of gains and a 2.45% increase.
The FTSE-BIVA, the primary index of the Bolsa Institucional de Valores (Biva), gained 0.87% to 1,161.09 points, also experiencing three days of gains with a 2.55% increase.
Most values in the reference index advanced, with Puerto de Liverpool leading the way with a 6.88% rise to 102.55 pesos, followed by Grupo México with a 4.63% increase to 113.54 pesos, and Industrias Peñoles with a 2.80% rise to 499.36 units.
However, Grupo Televisa stocks fell the most, 2.77% to 9.11 pesos, followed by Alfa with a 2.24% decrease to 13.51 pesos, and Regional with a 2% drop to 158.38 pesos.
The Banco de México reduced its reference interest rate by 50 basis points on Thursday, marking its fourth consecutive significant adjustment.
With this move, the cost of money is now at 8%, its lowest level since 2022. The authority indicated that it would consider further interest rate cuts this year.
The S&P/BMV IPC has gained 2.15% so far this week, supported by improved investor sentiment following the ceasefire in the conflict between Israel and Iran in the Middle East.
The primary Mexican market index has risen 16.08% year-to-date.
Key Questions and Answers
- Q: What drove the surge in Wall Street markets? A: Anticipation of potential Fed rate cuts and a more contained geopolitical situation in the Middle East fueled investor optimism.
- Q: Which indices neared record highs? A: The Nasdaq Composite and S&P 500 approached their historical peaks.
- Q: How did the Dow Jones Industrial Average perform? A: The Dow Jones Industrial Average rose but remains below its historical maximum.
- Q: What impacted Mexican stock markets? A: The Banco de México’s monetary policy announcement and improved investor sentiment following the Middle East ceasefire drove Mexican stock markets higher.
