Live Markets: A 50 bps cut by Fed in September? Big banks say maybe

Hims

05/08/2025 16:42

Main US indexes dip; Nasdaq off ~0.7%

Materials leads sector gains, utilities leads losers

Euro STOXX 600 index up ~0.1%

Dollar up slightly; gold rises; crude, bitcoin both down >1%

US 10-Year Treasury yield edges down to ~4.194%

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A 50 BPS CUT BY FED IN SEPTEMBER? BIG BANKS SAY MAYBE

The U.S. labor market showed signs of strain in July, with job growth underwhelming and prior payroll figures revised down by a substantial 258,000, putting a September interest rate cut by the Federal Reserve back on the table.
The likelihood of a Fed rate cut in September has climbed to around 89%, per CME Group'sFedWatch tool, up from ~63% on July 29. Market participants see at least two quarter-point cuts by the end of this year. But traders are  currently implying a zero chance for a 50-basis-point cut in September, according to the CME site.
Big banks like Goldman Sachs and Citigroup have however flagged the possibility of a 50-basis-point rate cut in September, contingent on a second consecutive soft jobs report in August or an increase in initial jobless claims from their still-low level.
Citi believes a 4.5% unemployment print could be the tipping point for the Fed to deliver a 50bp rate cut.
Analysts at Morgan Stanley say the downward job growth revision implies a 9 percentage point increase in the probability of recession, even as other brokerages have scaled back recession risks amid easing trade uncertainties.

(Joel Jose)

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Wall Street loses ground after weak services data https://fingfx.thomsonreuters.com/gfx/mkt/lbpgzjdnnvq/Pasted%20image%201754404169984.png