U.S. Stock Markets Advance, More Signals from the Fed Awaited

Stock markets were trading slightly higher on Monday as investors took a breather at record levels in anticipation of further signals from the Federal Reserve this week.

The preference for interest rate cuts following the Fed’s tapering efforts caused both the S&P 500 and the Dow Jones Industrial Average to hit record highs the previous week. Although the NASDAQ Composite also rose, the most recent weakness in technology stocks kept the index below its all-time highs.

Fed and PCE inflation under discussion this week

A number of Fed officials and rate-setting committee members are scheduled to speak this week, most notably Chairman Jerome Powell, who will speak next Thursday.

The Fed also cut interest rates by 50 basis points last week, ushering in a new easing cycle that could signal a rate drop of as much as 125 basis points this year.

Although this move had served to propel Wall Street to record highs, overall gains were limited as the Fed maintained a less dovish estimate for the medium to long term.

The central bank indicated that neutral rates are likely to be much higher than in the past.

The pace of the easing cycle is also expected to depend largely on the U.S. economy.

The PCE price index, which is the Fed’s favorite inflation index, will be released next Friday and will give further signals on interest rates. Inflation continues to be well above the Fed’s annual target of 2%.

Investors will closely monitor Monday’s economic activity data from the services and manufacturing sectors. Meanwhile, Republicans in the U.S. House of Representatives have proposed a plan to keep the government funded for three months, aiming to avoid a shutdown.

Will Apollo make its investment in Intel?

In the corporate sector, Apollo Global Management is considering a nearly $5 billion investment in troubled chipmaker Intel (INTC), according to Bloomberg.

The asset manager noted that it would be willing to make an equity-like investment in Intel, according to the Bloomberg report, and that the chipmaker’s senior management is mulling the offer.

Intel is facing a sharp decline in sales and has already outlined a series of cost-cutting measures, including plans to cut as many as 15,000 employees.

Oil rises on Middle East tensions

Crude oil prices rose on Monday, boosted by the possibility that escalating conflict in the Middle East could reduce regional supplies. Israel has launched attacks in Gaza and Lebanon, raising concerns that the conflict could disrupt supplies and strain global markets. 

Crude oil prices have been recovering over the past two weeks from three-year lows, driven by concerns over supply disruptions in the aftermath of Hurricane Francine.