By Mark DeCambre, MarketWatch
The stock-market rally appears to be on again amid easy-money
policies
U.S. stock indexes late-morning Thursday extended gains to a
fourth straight day, testing fresh records, but off their highest
levels, after the Federal Reserve signaled that policy easing may
be forthcoming.
How are benchmarks faring?
The Dow Jones Industrial Average rose 191 points, or 0.7%, to
27,735, marking its highest trading level since Oct.3. The S&P
500 index gained 21 points, or 0.7%, to 2,947, trading above its
April 30 closing record at 2,945.83 and touching a new intraday
peak at 2,956.20 earlier in the session, surpassing its May 1
intraday record. Meanwhile, the Nasdaq Composite Index climbed 62
points, or 0.8%, trading within 2% from its May 3 closing high at
8,164.
What's driving the market?
Federal Reserve Chairman Jerome Powell on Wednesday strongly
implied that the central bank would cut benchmark interest rates,
currently at a range of 2.25%-2.50%, in the coming weeks if the
economic outlook buffeted by U.S.-China trade tensions doesn't show
signs of improvement.
"The case for somewhat more accommodative policy has
strengthened," Powell said at a news conference on Wednesday to
discuss the rate-setting Federal Open Market Committee's highly
anticipated decision. Policy makers kept rates unchanged as
expected but removed the word "patient" from its updated policy
statement, suggesting that it is ready to act soon.
Although markets have been widely anticipating that the Fed
would respond to growing signs of stress in the economy, the
central bank's posture on looser monetary policy was seen as
providing a strong case for the continued rise in stocks despite
concerns about lurking economic problems.
The Fed remained mostly optimistic about the outlook, but said
inflationary pressures have receded, compelling it to lower its
forecast for PCE inflation in 2019 to 1.5% from 1.8%, below its 2%
target. At the same time, it left its gross domestic product
estimate at 2.1%.
Curiously low inflation has been often cited by FOMC members as
one of the key reasons for its doubts about its monetary policy
path. The Fed next meets July 30-31, while President Donald Trump
is expected to speak to Chinese President Xi Jinping on the
sidelines of the coming Group of 20 meeting of well-developed
nations in Japan in late June, where a detente on trade policy
could be reached.
See: Recap of Fed decision and Powell press conference
(http://www.marketwatch.com/story/fed-decision-and-powell-press-conference-live-blog-and-video-2019-06-19)
Dovish rhetoric from central-bank policy makers across the globe
this week has helped to send commodity prices, and particularly
gold, rocketing higher, with heightened expectation that interest
rates, which can undercut appetite for bullion, will could be
lowered.
Bank of Japan Gov. Haruhiko Kuroda
(http://www.marketwatch.com/story/bank-of-japan-joins-fed-ecb-in-signaling-easing-if-needed-keeps-policy-on-hold-for-now-2019-06-20)
and the Bank of England on Thursday, joined the chorus of bankers
including Powell and European Central Bank President Mario Draghi,
signaling a readiness to increase stimulus should global risks at
least partly spurred by trade, worsen.
The BOJ's
(https://www.wsj.com/articles/boe-warns-on-global-economic-outlook-as-it-holds-rates-steady-11561030288?mod=searchresults&page=1&pos=3)Kuroda
said "we'll of course consider expanding stimulus without
hesitation," he told a news conference, according to Reuters
(https://www.reuters.com/article/us-japan-economy-boj/bank-of-japan-holds-fire-on-policy-joins-fed-in-warning-of-mounting-global-risks-idUSKCN1TL06C).
Which data are in focus?
The Philadelphia Fed manufacturing index
(http://www.marketwatch.com/story/philly-fed-manufacturing-index-weakens-to-just-above-zero-in-june-2019-06-20)in
June fell to just 0.3 after registering a four-month high of 16.6
in the prior month. Any reading above zero indicates improving
conditions. Economists polled by MarketWatch expected an 8
reading.
Initial jobless claims
(http://www.marketwatch.com/story/us-jobless-claims-fall-to-216000-no-sign-layoffs-are-on-the-rise-2019-06-20),
a rough way to measure layoffs, fell by 6,000 to 216,000 in the
seven days ended June 15, the government said Thursday.
What are strategists saying?
"Powell's press conference [on Wednesday] showed some
reluctance, but it seems markets are certain the Fed will cut in
July. If data deterioration is worst than expected, calls for a
50-basis cut at the July meeting will grow in the coming weeks,"
wrote Edward Moya, senior market analyst at Oanda in a daily
research note.
Which stocks are in focus
Slack Technologies Inc. is set to make its debut on the New York
Stock Exchange in an unusual direct listing of the enterprise
software company. Here's what you should know
(http://www.marketwatch.com/story/slack-non-ipo-5-things-to-know-about-the-direct-listing-2019-04-26).
The direct listing was expected to hit just before 1 p.m. Eastern
time.
How are other assets trading?
Before the U.S. markets opened on Thursday, Hong Kong's Hang
Seng Index rose 1.2% and China's Shanghai Composite Index rallied
by 2.4%. Japan's Nikkei 225 , meanwhile, closed up 0.6%, while in
Europe, the Stoxx Europe 600 traded 0.6% higher.
Gold futures , meanwhile, surged 3%, to the highest level since
2013 at $1,388.60 an ounce, while the 10-year Treasury note touched
a yield below 2%, and the U.S. dollar, as measured by the ICE U.S.
Dollar Index , fell 0.5% to 96.67.
Crude-oil prices surged, up more than 5% amid geopolitical
tensions in the Middle East
(http://www.marketwatch.com/story/iran-says-it-shot-down-us-drone-amid-rising-tensions-2019-06-19).
Iran says it shot down a U.S. drone in its airspace and Trump
issued a cryptic tweetm saying that Iran "made a very big mistake
(https://twitter.com/realDonaldTrump/status/1141711064305983488)."
Read:Strait of Hormuz: Global 'choke point' in focus as Iran
shoots down U.S. drone amid rising tensions
(http://www.marketwatch.com/story/strait-of-hormuz-oil-choke-point-in-focus-as-iran-shoots-down-us-drone-amid-rising-tensions-2019-06-20)
(END) Dow Jones Newswires
June 20, 2019 11:25 ET (15:25 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.