By Chris Matthews and William Watts, MarketWatch
UnitedHealth shares lead the Dow higher
U.S. stocks were mixed in afternoon trade Thursday, even with
the Nasdaq Composite Index setting a fresh intra-day record, after
a weak Treasury bond sale and a rise in inflation dampened
expectations for an expected Federal Reserve interest rate cut
later this month.
Powell testifying Wednesday before the House Financial Services
Committee and Thursday in front of the Senate Banking Committee
gave investors more hope that a rate cut is coming.
What are major benchmarks doing?
The Dow Jones Industrial Average rose 18 points, or 0.67%, to
27,040, while the S&P 500 index was 1.7 point higher at 2,994 a
gain of 0.06%. The Nasdaq Composite Index fell 12 points, or 0.15%,
to 8,190.
On Wednesday
(http://www.marketwatch.com/story/stock-futures-point-slightly-lower-ahead-of-testimony-by-feds-powell-2019-07-10),
the Nasdaq gained 60.80 points, or 0.8%, closing out the session at
a record 8,202.53. The Dow added 76.71 points, or 0.3%, to finish
at 26,860.20, while the S&P closed 13.44 points higher, up
0.5%, at 2,993.07.
The S&P 500 was trading above its July 3 closing record high
of 2,995.82, after seeing a new intraday high on Wednesday, while
the Dow was trading above its July 3 record close of 26,966.
Read:S&P 500 index tops 3,000 for first time -- here's how
the stock market got here and what it means
(http://www.marketwatch.com/story/sp-500-index-tops-3000-for-first-time-heres-what-it-means-and-how-the-stock-market-got-here-2019-07-10)
(http://www.marketwatch.com/story/sp-500-index-tops-3000-for-first-time-heres-what-it-means-and-how-the-stock-market-got-here-2019-07-10)
What's driving the market?
Investors were partially spooked by an afternoon Treasury bond
sale that saw weaker-than-expected demand.
Check out: U.S. Treasury yields jump after 'borderline shocking'
bond auction
(http://www.marketwatch.com/story/us-treasury-yields-struggle-for-direction-as-traders-gear-up-for-cpi-data-2019-07-11)
"Pricing didn't go as well as expected and rates went up," Randy
Frederick, managing director of Trading & Derivatives at Schwab
Center for Financial Research, told MarketWatch. "The market
initially rallied on the prospect of a rate cut, but the long-end
(of the yield curve) moved higher. It's odd, but that seems to be
the biggest thing to damper demand this afternoon."
Initially, investors cheered remarks by Powell on Wednesday when
he told the House that uncertainty around trade policy tensions and
the global economic outlook
(http://www.marketwatch.com/story/powell-says-uncertainties-continue-to-weigh-on-us-economic-outlook-and-fed-stands-ready-to-act-2019-07-10),
has continued since the Fed's June policy meeting, while citing
persistently low inflation, as reasons to consider easing policy.
Powell's testimony was seen affirming expectations the central bank
will move to cut interest rates when policy makers meet at the end
of the month.
"Markets were in buoyant mood on Thursday as Fed Chairman Jerome
Powell gave his strongest indication yet that the Federal Reserve
will slash interest rates at the July 30-31 meeting," said Raffi
Boyadjian, senior investment analyst at XM, in a note.
Rex Nutting:Trump and the stock market are spooking Powell into
making this rookie mistake
(http://www.marketwatch.com/story/trump-and-the-stock-market-are-spooking-powell-into-making-this-rookie-mistake-2019-07-10)
Taking questions from the Senate Banking Committee Thursday,
Powell reinforced the message he sent yesterday, while making a
case for why a 'preemptive' rate cut could be necessary, even if
economic and job growth remain strong.
An important reading of consumer price inflation
(http://www.marketwatch.com/story/consumer-inflation-edges-up-01-in-june-cpi-shows-but-price-pressures-still-muted-2019-07-11)
rose
(http://www.marketwatch.com/story/consumer-inflation-edges-up-01-in-june-cpi-shows-but-price-pressures-still-muted-2019-07-11)
0.1% in May, versus a 0.2% rise expected by economists polled by
MarketWatch, with the core CPI, which strips out volatile food and
energy prices, rising 0.3%, above the consensus expectations of
0.2%, and the fastest monthly gain since January of 2018.
Year-over-year, CPI inflation fell to 1.6%, from 1.8% in April,
with core CPI rising to 2.1% in May, up from 2.0% in April. Though
not the Federal Reserve's preferred measure of inflation, the CPI
data should factor into how aggressive the Fed will be in cutting
interest rates in the coming months.
"It's a little higher than we thought but it seems like it's
going to take a lot more than a monthly data point to push Powell
away from his dovish stance," wrote Mike Loewengart, vice president
of investment strategy at E-Trade, in an email. "The Fed has pretty
much made it clear that the negatives of a cooling economy and
ongoing trade tensions outweigh the positives of a Goldilocks
inflation number and last week's solid jobs read."
Read:Fed minutes of June meeting bolster sense of imminent
interest-rate cut
(http://www.marketwatch.com/story/minutes-of-feds-june-meeting-bolster-sense-of-imminent-interest-rate-cut-2019-07-10)
Investors will also continue to pay close attention to the
developments on the international trade front, with the Washington
Post reporting
(https://www.washingtonpost.com/business/economy/trump-team-fears-new-face-on-china-trade-team-signals-tougher-stance/2019/07/10/5b6c24d2-a349-11e9-b732-41a79c2551bf_story.html?utm_term=.23a1dcb423e2)
that the Trump administration is growing concerned about prospects
for a trade deal with China.
President Trump elaborated on this concern, tweeting Thursday
that China is "letting us down," by not increasing purchases of
agricultural products, that president says was part of the trade
truce reached at the G-20 summit in June.
(https://twitter.com/realDonaldTrump/status/1149318492711264257)
Meanwhile, the Trump administration is launching an
investigation into France's proposed tax
(http://www.marketwatch.com/story/trump-trade-representative-to-investigate-french-tech-tax-targeting-google-amazon-and-facebook-2019-07-11)
on internet giants like Google parent Alphabet Inc. (GOOGL)
(GOOGL), Amazon.com Inc. (AMZN) and Facebook Inc. (FB). U.S. Trade
Representative Robert Lighthizer's agency will investigate the tax
under Section 301 of the Trade Act of 1974, the same provision it
used last year to investigate China's technology policies, leading
to tariffs on $250 billion worth of Chinese imports, the Associated
Press reported.
Fed Vice Chairman Randal Quarles is set to take part in a
conversation at the Bipartisan Policy Center at 1:30 p.m. Eastern,
while New York Fed President John Williams is due to speak at the
University of Albany at the same time.
New applications for jobless benefits for the week ended July 6
fell to 209,000
(http://www.marketwatch.com/story/us-jobless-claims-drop-to-3-month-low-of-209000-around-july-4-holiday-2019-07-11),
versus 221,000 the week prior.
Which stocks are in focus?
Cigna (CI) and CVSHealth (CVS) were up following news the Trump
administration is dropping a plan to curb rebates that drug
manufacturers pay to pharmacy-benefit managers such as Cigna's
Express Scripts
(http://www.marketwatch.com/articles/cigna-cvs-health-soar-as-dow-jones-industrial-average-rises-51562850268).
Dow component UnitedHealth Group Inc. (UNH), which owns a
subsidiary pharmacy benefit manger, was leading the blue-chip index
higher, up 12.97%.
Shares of Delta Air Lines Inc. (DAL) rose 1.2%, after the air
carrier reported
(http://www.marketwatch.com/story/delta-boosts-profit-outlook-dividend-2019-07-11)
that second-quarter revenue rose 8.7% in the second-quarter from a
year ago, while revenue per mile per seat rose by 3.8%. and
earnings growth beat analysts projections.
Unlike its competitors, Delta does not own any of Boeing 737 MAX
jets which have been grounded for four months by the FAA. American,
Southwest and United have lost a combined 72 jets from their
fleets. While their shares have lagged behind the rest of the
market, Delta's have kept pace with it.
Bed Bath and Beyond Inc. (BBBY) reported large losses
(http://www.marketwatch.com/story/bed-bath-beyond-earnings-slammed-by-another-large-impairment-charge-2019-07-10)
due to impairment charges for a second consecutive quarter
Wednesday evening, though it beat analyst estimates for earnings
when adjusting for those costs. Shares in the home goods retailer
fell 2.9% Thursday
Shares of Weight Watchers International Inc. (WW) rose 7.8%
Thursday, after J.P. Morgan analyst Christina Brathwaite said she
was no longer bearish
(http://www.marketwatch.com/story/weight-watchers-stock-jumps-after-jp-morgan-backs-off-from-bearish-stance-2019-07-11)
on the weight management and wellness company, citing her belief
that subscriber trends have stabilized.
How are other markets trading?
The yield on the 10-year U.S. Treasury note rose 5.8 basis points to 2.119%.
In Asia, stocks closed mostly higher
(http://www.marketwatch.com/story/asian-shares-rise-after-fed-signals-us-rate-cut-likely-2019-07-11),
with the Nikkei 225 adding 0.5%, while the Shanghai Composite index
rose 0.1% and Hong Kong's Hang Seng added 0.8%. European stocks
closed lower, with the Stoxx Europe 600 losing 0.1%.
In commodities markets, the price of crude oil fell 0.13% and
the price of gold fell 0.25%. The U.S. dollar edged lower versus
its major rivals.
Additional reporting by Joy Wiltermuth
(END) Dow Jones Newswires
July 11, 2019 15:23 ET (19:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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