It looks like investors are taking a cautious approach, with stock futures drifting flat to slightly negative following the S&P 500’s fresh record close. The market is digesting Fed Chair Powell’s comments, which reinforced the idea that the Fed is not on a predetermined path and hinted at smaller rate cuts moving forward. Powell’s statement about potentially two more quarter-point rate cuts this year, depending on economic conditions, seems to have tempered expectations for larger, more aggressive cuts in November. This is reflected in the shift in market sentiment, with the odds of a 50 bps cut dropping to around 36% and expectations for a more modest 25 bps cut now standing at 64%.
 

Investors are now looking ahead to key economic data this week, including the September jobs report, JOLTS, and ISM manufacturing and services PMIs, which could provide further clarity on the Fed’s next moves. The strength of the dollar, particularly against the yen, and the firming of the 10-year Treasury yield suggest that markets are adjusting to the idea of a more gradual approach to rate cuts.

Overall, while the market remains supported by strong sectors like energy, communication services, and real estate, there’s a degree of uncertainty as traders await more data to gauge the Fed’s future course. The upcoming economic reports will likely be pivotal in shaping sentiment over the next few weeks.

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