• Dow Jones is set to end the week close to where it started.
• The major equity index recovered after Monday's thousand-point plunge, but nothing more.
• Markets now pivot to focus on next week’s inflation data.

The Dow Jones Industrial Average (DJIA) is trading mostly flat on Friday, testing the water near the week’s opening bids after a run of volatility sparked by broad-market concerns that the Federal Reserve (Fed) might have missed the train on rate cuts. A turn towards the softer side in US data prints late last week sparked a risk-off plunge across the global markets, coupled with an unwinding of the Yen carry trade after the Bank of Japan (BoJ) ended favorable rate differentials.

After kicking off the trading week with a thousand-point plunge, the Dow Jones is back to where it started, paddling around 39,400.00. Investor hopes for an “emergency rate cut” from the Fed failed to materialize after markets realized that six-digit US Nonfarm Payrolls jobs growth, unemployment below 5%, steady wage growth, and week-on-week jobless claims within long-term averages may not be the economic disaster it was made out to be last week.

Still, market focus remains squarely on the odds of a September rate cut. Rate markets have fully priced in the start of a rate cutting cycle when the Federal Open Market Committee (FOMC) meets on September 18, but bets of an initial double cut for 50 basis points have eased to slightly-better-than-even from nearly 70% earlier this week. According to the CME’s FedWatch Tool, rate traders are pricing in 53.5% odds of a 50 bps cut in September, with an additional two cuts worth 25 basis points apiece through the remainder of 2024.