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Stocks - Wall Street Hits Highs as Powell Hints Rate Cut Is Ahead

Stock MarketsJul 10, 2019 04:58PM ET
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Investing.com – Stocks rallied Wednesday and hit new highs after Federal Reserve Chairman Jerome Powell assured lawmakers the central bank will do what it can to sustain the economic expansion.

The Fed will "act as appropriate," Powell told the House Financial Service Committee in the first of two days of testimony about the state of the economy. It is a phrase he has used often in the last few months because he and the Fed are worried about the domestic economy and slowing business investment, trade disputes and other issues affecting global economic health.

But it was music to investors' ears. The NASDAQ Composite surged 0.75%, hitting new closing and intraday highs. The S&P 500 jumped at the open, briefly topping 3,300 for the first time before dropping back to a 0.45% gain and just under its July 3 close of 2,995.82 The Dow Jones industrials added 0.3%, also reaching a new intraday high of 26,983, up 200 points from the day before. But then the blue chips slid back.

The stock rally was accompanied by a 4.5% jump in oil prices, which was partly due to worries that storms in the Gulf of Mexico will shut down offshore production wells. The Gulf produces about 17% of U.S. crude oil. West Texas Intermediate crude, the benchmark U.S. oil, finished up $2.60 to $60.43 a barrel. Brent crude, the global benchmark, added $2.85 to $67.01. WTI is up 33% this year, while Brent is up nearly 25%.

Gold, meanwhile, moved solidly above $1,400 an ounce, finishing at $1,212.50 an ounce, and palladium shot up toward $1,600 an ounce.

But the big question of the day was if the Fed believes it needs to cut interest rates. And Powell offered many reasons that seemed to suggest a rate cut is coming at its July 30-31 meeting. Investing.com's Fed Rate Monitoring tool suggests the Fed will cut its key federal funds rate to 2%-2.25% from 2.25-2.5%. And maybe another rate cut in the fall.

Rates have been coming down as global economic worries -- most prominently the U.S.-China trade dispute and tensions in the Middle East -- grabbed investor attention. But Wednesday, longer term rates were higher. The 10-year Treasury yield moved up to 2.07% from 2.06% as investors shed bonds for stocks. The 10-year yield is still off 23% this year.

The market was led by energy stocks, thanks to the boost in oil prices. Chevron (NYSE:CVX) was the Dow leader with a 1.7% gain. Exxon Mobil (NYSE:XOM) added 1.4%.

Communications services, including Amazon.com (NASDAQ:AMZN) and Google parent Alphabet (NASDAQ:GOOGL), also were market leaders, along with tech stocks. Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Intel (NASDAQ:INTC) were all up 1%.

After hours, shares of Bed Bath & Beyond (NASDAQ:BBBY) rose 3.5% after earnings beat estimates.

Winners and losers in the S&P 500

Chesapeake Energy (NYSE:CHK), data-storage company Western Digital (NASDAQ:WDC) and healthcare technology manufacturer Align Technology (NASDAQ:ALGN) were among the top S&P 500 performers on the day.

Hanesbrands (NYSE:HBI), life-insurance company Unum Group (NYSE:UNM) and equipment distributor WW Grainger (NYSE:GWW) were among the weakest S&P 500 performers.

Stocks - Wall Street Hits Highs as Powell Hints Rate Cut Is Ahead
 

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Comments (6)
Foolish Trader
Foolish Trader Jul 11, 2019 12:24PM ET
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Since when there is hint on rate cut ahead.  Powell keep mentioning the recent results indicate economy recovery.  So is rate cut still possible? Unless the trade war didnt go well.
John Nichols
John Nichols Jul 10, 2019 9:18PM ET
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The FED is nothing more than a false god. The mandates make absolutely no sense in this age.
Doug Jones
theDweeb Jul 10, 2019 9:18PM ET
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The independence mandate is misunderstood. Sometimes doing what's right for the US economy is synonymous with political policy, such as making a stand together on the trade war.
Johannes Stevens
Johannes Stevens Jul 10, 2019 9:18PM ET
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or maybe doing what's good for the economy by creating a false eulissn...
Ray Tovmasyan
Ray Tovmasyan Jul 10, 2019 6:37PM ET
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Its embarassing that 100 words article has typos.
Max Malcy
Max Malcy Jul 10, 2019 6:37PM ET
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You may want to look at your own statement as well...
Samuil Shenker
Samuil Shenker Jul 10, 2019 5:30PM ET
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Check your quotes whoever wrote this
Mojo Snake
Mojo Snake Jul 10, 2019 4:57PM ET
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Becase we all know this Market just isn't surviving without that rate cut. He's just going to keep dangling the carrot and you Lemmings are going to just keep chasing it.
jonah gaff
jonah gaff Jul 10, 2019 4:36PM ET
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so we should expect the fed to contradict there actions, wouldn't that cast doubt on feds future actions?
Doug Jones
theDweeb Jul 10, 2019 4:36PM ET
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Yes. It shows they are slow to learn, they were wrong and aren't transparent to admit it so they come up with 'global slowdown' reasons that was known for about a year. Whichever the reason, confidence is declining. Not good for the economy if you don't have confidence in the FED.
 
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