10/ Jul’19

Dow, S&P 500, Nasdaq hit new highs on Powell comments

Does the state of the economy warrant a Fed rate cut?

Anderson Capital Management’s Peter Anderson on the state of the U.S. economy and the outlook for Federal Reserve policy.

U.S. stocks traded higher on Wednesday following comments from testimony by Federal Reserve Chairman Jerome Powell on Capitol Hill.

Shares jumped after the head of the central bank, in his semi-annual monetary report to federal lawmakers, signaled a rate cut is possible, noting “crosscurrents have reemerged, creating greater uncertainty” in the U.S. economy.

Before Powell's testimony, Wall Street put the odds of a half percentage point rate cut at zero; after Powell's testimony, the odds jumped to 29 percent.

Investors are looking to the Fed's July 31 policy meeting for rates to be cut.

“Fed Chairman Powell’s testimony today, including his explicit comment that the most recent job report (which was very strong) had not changed the Fed’s thinking, was a clear signal that they are indeed ready to cut rates at least as much as 25 basis points later this month,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told FOX Business.

The Dow Jones Industrial Average, Nasdaq Composite and S&P 500 all hit new intraday highs. At one point in the session, the S&P crossed the 3,000 threshold for the first time.

The yield on the 10-year Treasury slipped fractionally to 2.07 percent.

Oil prices jumped 2.39 percent to $60.23 per barrel after a reduction in U.S. crude inventories was more than expected and as major producers evacuated rigs in the Gulf of Mexico ahead of an expected storm.

Gold prices climbed 1.3 percent to $1,418.70 per ounce.

Shares of tech companies such as Amazon.com, Apple and Facebook helped to lift the Nasdaq and the S&P.

Shares of Levi Strauss & Co fell after the company reported that sales growth would slow in the second half of the year due to weakness in its wholesale business.

In Asian markets on Wednesday, China's Shanghai Composite ended 0.4 percent lower after Chinese producer price inflation came in flat, raising concerns about domestic growth. Hong Kong's Hang Seng added 0.3 percent and Japan's Nikkei was off 0.2 percent.

European markets closed lower. London's FTSE slipped 0.1 percent, Germany's DAX was off 0.5 percent and France's CAC was down 0.1 percent.