Markets (^DJI, ^IXIC, ^GSPC) had a lot to digest today, with the release of the May CPI report in the morning followed up by the Federal Reserve's decision to maintain interest rates steady in the afternoon.

BNP Paribas Managing Director and Senior Multi-Asset Specialist Mark Howard joins Market Domination to provide his insights into market outlooks in the wake of these pivotal events.

Howard emphasizes that "the bigger news" was the inflation data rather than the Fed's expected rate policy, stating CPI "was the real mover" of markets. The report not only triggered a rally in tech stocks and provided relief to Treasury yields but also "opened the door perhaps to a September rate cut." Although the Fed signaled a potential rate cut in December, Howard suggests that "it was a positive day" overall for the markets.

"If we entered the day expecting three cuts, and we're leaving the day expecting just one cut, then we're that much closer to the rates actually not getting cut at all," Howard tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video Transcript

Federal Reserve dialing back its expectations for the number of rate cuts this year.

Now, at one, it comes on the heels of a cooler than expected reading on consumer prices.

The S and P 500 NASDAQ closed at records.

Joining us now is Mark Howard BNP Pers managing director and senior multi asset specialist.

Mark.

Thanks for joining us.

Thank you very much.

So we'll start Mark uh just the news that day, give us, give us your take mark on what the fed did and said today, you know, there's a lot to digest unusual double header with CP I and the fed.

Um I think the bigger news day was frankly the CP I than the fed.

Uh the fed did have the information at its disposal that went into its projections and its dot plot.

But uh the real mover today as you saw in market action was CP I which helped long duration equities like the tech stocks.

You were just talking about brought yields down.

Uh 10 year treasury and two year treasury all rallied.

Uh and it opened the door perhaps to a September uh rate cut.

But then the Fed came in later and said, you know, not so much, it's probably more like December.

So that was the, the narrative today, but it was a, a very positive day as you mentioned for, you know, most of the equity market, most of the bond market.

And uh and so that's uh that sets a kind of a clear pace, uh clear path for the next month or two.

So you, so you interpreted uh Jay Powell's commentary today to say it's more likely December than September.

What, what was what in his commentary sort of pushed you in that direction.

Well, it was, it, it was not just his commentary, but certainly Julie, he did make it clear that they're not yet comfortable enough with um the sustainability of inflation readings down close to 2%.

Uh And you actually saw that in a revision upward of their core P ce forecast for the full year.

So that's one indicator.

Uh The second was the change in that dot plot, that median dot plot and the fact that the overall board is now um the median is now for just one cut this year instead of previously, they were looking for three.

So um when you, when you go from 3 to 1, uh you're basically pushing everything back, they did add one to next year in their projections.

But as we all know, the out years are kind of highly su sub suspect mark.

I'm just when you think about the fed's path here, you know, whether they do one cut or two cuts or three cuts, does that, does that influence the impact mark?

How you think about the US stock market and kind of, you know, the near to inter mere term?

Yes, it does because, uh Josh, we're at all time highs.

It's not like we're kind of treading along in the middle and the rate cuts are kind of a marginal thing.

The the valuation paradigm uh is somewhat based on the expectation that rates are not gonna go higher.

So if we entered the day expecting three cuts and we're leaving the day expecting just one cut, then we're that much closer to the rates, actually not getting cut at all.

And that, that, that matters to valuation, that matters to general sentiment.

Um But as I said before, it's not just about the cuts, it's about the data and the data are what are gonna determine when the cuts come.

And the CPA DC P I data was positive.