Fed signaled rate cut
The broader US stock market rebounded sharply on June 4 after Fed Chair Jerome Powell indicated a possible rate cut in the near future. In his speech yesterday at the Monetary Strategy, Tools and Communications Practices Conference, Powell said that the US central bank would take appropriate action to sustain economic expansion.
In regard to the ongoing trade disputes with China, Mexico, and other nations, Powell said, “We do not know how or when these issues will be resolved,” CNBC reported. He further added, “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”
Nonetheless, Powell did not explicitly mention that the Fed would lower interest rates, but his remarks hinted that the central bank is closely monitoring the ongoing trade disputes with several countries. His comments instilled confidence in investors that the Fed is well prepared to counter any economic damage arising from the ongoing trade disputes.
Broader market soared
Powell’s comment yesterday raised hopes for a rate cut in the near term, most probably twice by the end of this year. Following the Fed’s optimistic comments, the broader US market bounced back strongly on Tuesday.
The Dow Jones, the NASDAQ, and the S&P 500 all gained over 2%. Except for Verizon, all the Dow Jones 30 components registered an intraday gain in their respective stock prices.
Bank and technology stocks were the biggest gainers. Dow components, Goldman Sachs (GS), JPMorgan Chase (JPM), Apple (AAPL), IBM (IBM), and Intel (INTC) stocks gained 3.7%, 3.1%, 3.7%, 3.5%, and 3.1%, respectively.
The iShares U.S. Financial Services ETF (IYG), which invests in US financial services stocks, gained 3.3% on June 4. The Technology Select Sector SPDR Fund (XLK), which invests in S&P 500 technology stocks, closed 3.3% higher yesterday.