By Sue Chang and Mark DeCambre, MarketWatch
Geopolitical jitters cap upside
U.S. stock indexes gained Thursday with the S&P 500 hitting an intraday record after the Federal Reserve signaled that policy easing may be forthcoming. However, major indexes came off their session highs on geopolitical uncertainties as tensions between the U.S. and Iran escalated.
How are benchmarks faring?
The Dow Jones Industrial Average rose 135 points, or 0.5%, to 26,639. The S&P 500 index added 15 points, or 0.5%, to 2,941, after earlier touching a new intraday peak of 2,956.20. The Nasdaq Composite Index climbed 34 points, or 0.4%, to 8,021.
What's driving the market?
Geopolitical tensions are capping a hot start for the market as President Donald Trump hinted at the possibility of increased hostilities with Iran after the Islamic country shot down a U.S. drone in its airspace. The president tweeted earlier that Iran "made a very big mistake" and said, "You'll soon find out" if the U.S. decides to strike back.
Markets rallied at the open on after 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%.
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 the world's richest countries in Japan next week where a detente on trade 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 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 0.3 after registering a four-month high of 16.6 in May. 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.
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.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said although the consensus in the market is that the Fed could lower interest rates as early as next month, the fact that it didn't take action this week bolstered confidence as a precipitated rate cut could have panicked investors.
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. The direct listing was expected to hit just before 1 p.m. Eastern time.
See: Here's what you should know about Slack's IPO (http://www.marketwatch.com/story/slack-non-ipo-5-things-to-know-about-the-direct-listing-2019-04-26)
Shares of Oracle Corp.(ORCL) rallied 7.7% after the software company reported better-than-expected earnings (http://www.marketwatch.com/story/oracle-stock-hits-all-time-high-after-earnings-2019-06-20) and an upbeat outlook.
Akero Therapeutics Inc.(AKRO) shares jumped 21% to $19.39 on the biotechnology company's debut on the market. Akero priced its shares at $16 for its initial public offering.
How are other assets trading?
Asian stocks rose with Hong Kong's Hang Seng Index up 1.2%, China's Shanghai Composite Index rallied by 2.4%, and Japan's Nikkei 225 closed up 0.6%. In Europe, the Stoxx Europe 600 gained 0.4%.
Gold futures surged 3% to the highest level since 2013, while the 10-year Treasury note fell to 1.99%, and the U.S. dollar, as measured by the ICE U.S. Dollar Index , fell 0.5%. Crude-oil prices surged 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).
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 13:23 ET (17:23 GMT)
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