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Could Fed Drive Dow to a New Peak after Trump’s Rally on Tuesday?

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The Dow Index

Yesterday, the Dow Jones Industrial Average (DIA) settled near the 26,465 level with about 1.4% gains for the day. The index rallied after President Donald Trump said that he would be meeting President Xi Jinping next week on the sidelines of the G-20 Summit in Japan. Trump also noted in a tweet that the respective teams from both sides would start the talks before the leaders of the world’s two largest economies meet.

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Could Dow touch new peak?

The Dow Index’s close yesterday was not far away from its all-time peak of 26,951 in October 2018. At 2 PM ET today, the Federal Reserve is due to release its latest FOMC (Federal Open Market Committee) statement along with its latest decision on interest rates.

On June 4, Fed Chair Jerome Powell hinted at the central bank’s willingness to make monetary policy adjustments if needed to keep US economic expansion on track.

If the Fed does today what Powell hinted at earlier this month and announces a rate cut, the decision could boost investors’ confidence in the economy and drive the US stock market (SPY) up. Another broader market rally today after yesterday’s solid gains on trade optimism is could help the Dow reach a new peak soon.

Potential risk

Most investors and experts are expecting the central bank to announce a rate cut in June. However, if the Fed decides to keep the rate unchanged later today, it could badly hurt investors’ sentiments and trigger a market-wide massive sell-off.

On a year-to-date basis, the Dow index has gone up by 13.5%, while the S&P 500 benchmark and the NASDAQ Composite have risen by 16.4% and 19.9%, respectively.

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