On Thursday, Federal Reserve Governor Christopher Waller indicated a potential shift in monetary policy, hinting that if inflation aligns with his expectations, the central bank could implement multiple interest rate cuts this yearThis statement follows a notable drop in the yield of 10-year Treasury notes, which recently fell from a 14-month high, landing around 4.615%.

In commodity markets, gold prices reflected a slight increase, with the precious metal priced at approximately $2714.261 per ounce—an uptick of $18.001 or 0.67%. Throughout the trading session, gold reached a peak of $2724.744, while dipping to a low of $2689.725.

Waller articulated optimism regarding a possible initial rate cut sometime during the first half of the year, contingent upon favorable economic indicators related to pricing and unemployment rates

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He stated, "As long as inflation data holds steady or improves, I believe we could see rate cuts happening sooner than market expectations." This perspective aligns with the market's shifting sentiment, as traders adjusted their positions following his remarks.

Post-Waller's speech, betting on aggressive rate cuts intensified among tradersData from the Chicago Mercantile Exchange Group (CME Group) revealed that the likelihood of a rate cut in May surged to about 50%. However, the anticipation for a June cut appears more pronounced, with expectations for a second cut by the end of the year rising to approximately 55%, a notable uptick from about 10 percentage points prior to his comments.

Central to Waller's viewpoint on maintaining a dovish policy stance is his belief that inflation will progressively ease over time, despite several months of data indicating sticky prices in certain sectors

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The core Consumer Price Index (CPI), which excludes food and energy, decelerated to 3.2% in December, marking a 0.1 percentage point decline from the previous month, yet remaining significantly above the Fed’s target of 2%.

"I believe inflation will continue to trend closer to our objective over timeYear over year, the rigidity we see in 2024 should start to dissipate," he remarked"Hence, I may be a bit more optimistic than my colleagues regarding inflation's downward trajectory, which directly influences my outlook on the policy path."

During the upcoming Federal Open Market Committee meeting scheduled for late January, where prevailing sentiments indicate an extremely low chance of rate cuts, market participation continues to reflect cautious optimism about the future of monetary policy

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The members expect that there will be two interest rate reductions in 2025; however, they underscore that the Fed will adopt a prudent and patient approach.

On the stock exchange front, the S&P 500 index concluded a three-day rally with a decline, as major tech stocks recededThe index dipped 0.21% to close at 5,937.34, while the tech-heavy Nasdaq descended 0.89% to 19,338.29. Meanwhile, the Dow Jones Industrial Average witnessed a modest drop of 68.42 points, finishing at 43,153.13, reflecting a downturn of 0.16%.

Apple experienced a 4% drop in share prices, marking its worst day since August 5, falling nearly 12% from its December 2024 peak—making it the poorest performer among seven major tech firms.

Conversely, Morgan Stanley reported earnings exceeding expectations, catalyzing a 4% surge in its stock price

Similarly, while Bank of America's performance also surpassed forecasts, its share price slightly declined by around 1%. Prior to this, various other financial heavyweights including JPMorgan Chase and Goldman Sachs unveiled robust fourth-quarter earnings that exceeded market anticipations.

Overall, the earnings season kicked off strong, with 77% of announcing companies reporting results that outperformed forecasts.

Keith Buchanan, Senior Portfolio Manager at Global Investments, noted, "The market seems somewhat heavy, even exhausting, as it attempts to discern the next momentum for an upward movementThe initial earnings reports from the banking sector have certainly been positive, yet it seems there could be more favorable news down the line, which is reflected in today's trading performance."

Over the last two years, the U.S

alefox

stock market has consistently reached new heightsWells Fargo indicated that investors still on the sidelines may find appealing entry points in 2025. Though Wall Street remains bullish about further upward trends in the markets this year, it cautions that the pace will not mirror the rapid growth of recent years, with investors potentially encountering numerous buying opportunities during downturns.

Scott Wren, Senior Global Market Strategist at Wells Fargo, elaborated on his perspective, suggesting the market is transitioning into an "opportunity zone." The bank forecasts the S&P 500 index to hover between 6,500 and 6,700 by the end of the year, indicating a potential rise of up to 13% from current levels.

In a report directed at investors, Wren advised preparedness for capitalizing on any market corrections, stating, "We tend to take advantage of such dips to gradually reposition stock allocations, as there could be appealing entry points in both equity and debt markets in the upcoming weeks and months, and we want to be well-prepared."

// The inflation scenario may not be as dire //

The head of macroeconomic research at Bridgewater, Bob, pointed to the Federal Reserve's data indicating that current inflation in the United States is not experiencing a significant rise, showing only minor fluctuations.

The Consumer Price Index (CPI) reported by the U.S

Bureau of Labor Statistics for December 2024 showed a core inflation rate, excluding food and energy, rising to 3.2%. This marks a decline from the previous month and is below economists' estimates of 3.3%. Overall, the inflation rate for the past 12 months increased by 2.9%, aligning with expectations.

According to New York Fed's Williams, the anti-inflation process is progressing, yet there remains a gap to the 2% inflation target, necessitating more time for sustained achievementHe also addressed that the recent long-term interest rate hikes reflect not only the strength of new data but also market concerns regarding fiscal policy, other regulations, and global developments

Richmond Fed's Barkin remarked that the new price data continues the trend of inflation retreating to target levels, although policymakers must maintain restrictive measures to ensure inflation eases smoothly to 2%. Chicago Fed's Goolsbee welcomed the latest consumer price data, perceiving them as supportive of his outlook for easing price pressures, regarding 2025 with optimism and believing a soft landing is achievable.

As the U.Sstock earnings season progresses, major banks like Bank of America have reported robust fourth-quarter earnings, with total revenues of $25.3 billion, compared to $22 billion in the same period last yearNet profits stood at $6.7 billion, significantly up from the previous year's $3.1 billionFollowing the earnings report, Bank of America’s stock surged nearly 3% in pre-market trading.

Union Health reported fourth-quarter revenues of $100.81 billion, slightly below market forecasts of $101.68 billion; however, adjusted earnings per share (EPS) reached $6.81, above market expectations of $6.71. For 2025, adjusted EPS is forecasted between $29.50 to $30.00, in accordance with market predictions of $29.73, with projected revenues ranging from $450-$455 billion, unsurprisingly higher than the market forecast of $447.22 billion.

Previously, major U.S