Published: Wed, July 10, 2019
Finance | By Loren Pratt

Stocks climb, dollar drops as Fed chair remarks boost rate-cut hopes

Stocks climb, dollar drops as Fed chair remarks boost rate-cut hopes

The benchmark S&P 500 breached the 3,000 points mark for the first time on Wednesday, as hopes of an interest rate cut later this month were lifted by Federal Reserve chief Jerome Powell's comment that the central bank would "act as appropriate" to sustain record US growth.

Powell hinted strongly at a cut in testimony Wednesday before the House Financial Services Committee, saying: "Since our May meeting, however, [growth and trade] crosscurrents have reemerged, creating greater uncertainty". US stocks advanced, pushing the S&P 500 index past 3,000 for the first time, and Treasuries rose with gold.

Since then, "it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the USA economic outlook", Powell said in prepared testimony for the House Financial Services Committee. Bond yields fell, sending the yield on the 10-year Treasury note down to 2.05% from 2.10% just before Powell's remarks were released. But with unemployment at close to record lows and the United States economy showing continued strength, the Fed left rates unchanged at it's last meeting.

Following Mr Powell's comments, the dollar fell against a basket of currencies and the major share indexes opened higher.

The dollar also gained to 108.92 yen JPY= , though the French data helped the euro recover to $1.1225 EUR= , still down from its $1.1412 of just a couple of weeks ago.

"It strongly suggests they're going to be inclined to ease at the meeting later this month", Michael Feroli, chief US economist at JPMorgan Chase & Co., said in a Bloomberg Television interview. USA futures are down by 0.4% while Treasury yields are marked higher, helping to see USD/JPY more steady at 108.80-90 levels. "Our take on it is that the path of least resistance over the next 12 months (for USA stocks) remains higher".

That step eased fears that Mr. Trump would extend punitive tariffs to an additional $300 billion in Chinese goods, in the process inviting retaliation from Beijing on American exports and likely weakening both nations' economies. "That's a positive for global markets and for financial conditions".

As news of Powell's testimony broke, the Dow Jones Industrial Average jumped 195 points, CNBC reports. Yields on two-year Treasuries rose US2YT=TWEB to 1.917% from their recent low of 1.696% and Europe's benchmark yields up around five basis points.

In commodity markets, oil prices rose as US crude inventories shrank more than expected and as major producers evacuated rigs in the Gulf of Mexico before a storm.

Brent crude futures rose 64 cents to $64.80, while US crude gained 82 cents to $58.65 a barrel.

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