The repercussions of delayed rate cuts continued to shake out in the U.S. stock market in the past week. Overall, the S&P 500 (Index: SPX) dropped a little over 1.5% from where it ended the previous week to close at 5,123.41 on Friday, 12 April 2024.

Most of that decline came on Friday. Bad news came in the form of diminished earning expectations for big U.S. banks, whose previous outlook had counted on the Federal Reserve delivering rate cuts starting before the end of 2024-Q2.

Speaking of which, with the change in outlook for rate cuts, the CME Group's FedWatch Tool now projects the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 31 July 2024. The tool also projects just two rate cuts in 2024, one on 31 July (2024-Q3), the other in December (2024-Q4). And a first rate cut on 31 July 2024 is looking shaky.

We've rolled the alternative futures chart forward to show the dividend futures-based model's projections for the S&P 500 through the second quarter of 2024.

(Click on image to enlarge)

We find the actual trajectory of the S&P 500 running below the model's projections, with the deviation taking place entirely during the past week. Right now, it's too early to tell if that's a consequence of a regime change in the market, which is on the table because of the change in expectations for the Fed's rate cuts. A regime change would mean the dividend futures-based model's multiplier has itself changed from the value of +1.5 it has mostly held since 9 March 2023. We'll be able to make that determination within the next few weeks.

In the meantime, here are the market-moving headlines from the week that was.

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