By Mark DeCambre, MarketWatch
Fed's Evans sees another interest rate cut this year
U.S. stocks on Wednesday mustered modest gains following a
dramatic turnabout, with all three key equity benchmarks recovering
from losses of at least 1% which were partly driven by signs that
global economic growth was slowing as the U.S. - China trade war
intensifies.
How did benchmarks perform?
The Dow Jones Industrial Average finished 22.45 points lower, or
less than 0.1%, to 26,007, after sinking 2.3% or 589 points, at the
session low. The S&P 500 index finished 2.21 points, or 0.1%,
higher at 2,883.98, after skidding nearly 2%, while the Nasdaq
Composite Index gained 29.56 points, or 0.4% to 7,862.83, reversing
an intraday 130-point slide in the technology-heavy index.
The reversal for the Dow and S&P 500 represents their
biggest turnarounds since Dec. 27, 2018, according to Dow Jones
Market Data.
On Tuesday
(http://www.marketwatch.com/story/dow-futures-jump-200-points-as-stock-market-attempts-to-recover-from-worst-day-of-2019-2019-08-06),
the Dow rose 311.78 points, or 1.2%, to end at 26,029.52, while the
S&P 500 index climbed 37.03 points, or 1.3%, to close at
2.881.77, while the Nasdaq Composite Indexsurged 107.23 points, or
1.4%, to finish at 7,833.27.
What's driving the market?
U.S. equity markets shook off losses to turn higher late in
thinly traded summer market, with little substantive news to drive
the move higher.
Stocks initially sank as U.S. Treasury and European government
bonds yields plumbed fresh lows. The 10-year Treasury fell below
1.70%, falling to an intraday nadir at 1.60%, around the lowest
since late 2016, but were backing up in late-session trade
Wednesday. Meanwhile, comparable German bonds hit a record low at
negative 0.59%.
"I don't think there's any exact headline or data point that
turned the markets around but I think investors are becoming more
rational about the economic environment we're in," Lindsey Bell,
investment strategist at CFRA, told MarketWatch, referring to the
domestic economy.
"We have a very strong consumer and things are on a solid
footing," Bell said.
J.J. Kinahan, chief market strategist at TD Ameritrade, said
that the volatility of the day could be partially attributed to
thin summer trading volumes. "A thinly-traded market can sometimes
exacerbate moves, and August trading tends to be light -- its
typically a sleepy month," he said.
Investors have been jittery about the prospects of a recession
in the U.S. against a weakening economic backdrop around the
world.
Adding to that sentiment, central banks in India and New Zealand
(as well as the Thailand
(http://www.marketwatch.com/story/bank-of-thailand-makes-surprise-rate-cut-2019-08-07))
on Wednesday lowered their domestic interest rates to levels lower
than had been expected, highlighting anxieties centered on the
health of the world-wide economy.
India's central bank cut
(http://www.marketwatch.com/story/indias-central-bank-cuts-lending-rate-to-540-2019-08-07)
its key interest rate for the fourth consecutive time, reducing the
repo rate by 0.35% to 5.40% to shore up the economy, while New
Zealand's central bank cut its benchmark interest rate to an
all-time low of 1% on Wednesday
(http://www.marketwatch.com/story/new-zealand-cuts-benchmark-interest-rate-to-lowest-ever-1-2019-08-07).
"Central banks in New Zealand, Thailand, and India all cut rates
overnight and that highlights how concerned central bankers are
about the state of the global economy," wrote David Madden, market
analyst at CMC Markets UK, in a Wednesday note.
In the U.S., Chicago Fed President Charles Evans on Wednesday
said
(http://www.marketwatch.com/story/feds-evans-wants-monetary-policy-at-a-level-that-will-slightly-boost-growth-2019-08-07)
he wants to adjust monetary policy until it is giving the economy a
slight boost. This means another quarter-point rate cut this year,
he said, in a breakfast conversation with reporters, noting also
that "more accommodation could be needed".
Meanwhile, for a second day in a row overnight Tuesday, the
People's Bank of China set the official midpoint reference for yuan
at 6.9996 in Asian hours
(https://www.wsj.com/articles/china-keeps-official-yuan-rate-just-stronger-than-7-per-dollar-11565157542?mod=newsviewer_click),
but the level is approaching 7 to the U.S. dollar, widely viewed as
a line in the sand for the currency. The PBOC fixes the currency
daily and allows it to move up to 2 percentage points on either
side of its midpoint.
A breach of that level on Monday, interpreted by some as an
intentional weakening of its currency, helped to ignite a global
stock market selloff and slump in bond yields, but markets
stabilized on Tuesday, despite the prospect of an uncertain
timeline for a Sino-American trade resolution.
Losses for stocks Wednesday accelerated after President Donald
Trump tweeted that the U.S's "problem is not China - We are
stronger than ever, money is pouring into the U.S. while China is
losing companies by the thousands to other countries, and their
currency is under siege - Our problem is a Federal Reserve that is
too... proud to admit their mistake of acting too fast and
tightening too much (and that I was right!).
The president said, the central bank "must cut rates bigger and
faster, and stop their ridiculous quantitative tightening NOW," he
tweeted:
(http://twitter.com/realDonaldTrump/status/1159083361803149312)
(http://twitter.com/realDonaldTrump/status/1159083364965654528)
Read: Why a falling Chinese yuan crushed the stock market and
intensified the trade war
(http://www.marketwatch.com/story/what-a-falling-chinese-yuan-means-for-the-stock-market-and-the-trade-war-2019-08-05)
Also see:Why the 'tail risk of a currency war can't be ruled
out' as U.S.-China tensions mount
(http://www.marketwatch.com/story/why-the-tail-risk-of-a-currency-war-cant-be-ruled-out-as-us-china-tensions-mount-2019-08-06)
Which stocks are in focus?
The Walt Disney Co. (DIS)on Tuesday said
(http://www.marketwatch.com/story/disney-sets-high-bar-with-new-1299-streaming-bundle-for-disney-espn-and-hulu-2019-08-06)
beginning Nov. 12, when the entertainment giant's ambitious
streaming service makes its debut, U.S. consumers will be able to
subscribe to a streaming bundle of Disney+, ESPN+ and
advertising-supported Hulu for $12.99 a month. Disney shares were
down by about 4.9%
(http://www.marketwatch.com/story/disneys-stock-the-biggest-drag-on-the-dow-would-shave-more-than-40-points-off-the-dows-price-2019-08-07)
after badly missing estimates for earnings.
Shares of CVS Health Corp. (CVS) rose 7.5% Wednesday after the
drugstore chain reported earnings that topped Wall Street
expectations
(http://www.marketwatch.com/story/cvs-stock-surges-46-after-second-quarter-earnings-beat-2019-08-07).
Office Depot Inc.'s stock (ODP)gained 0.6%
(http://www.marketwatch.com/story/office-depot-stock-rises-after-earnings-beat-2019-08-07)
after the business supply retailer reported second-quarter earnings
that beat expectations.
Lumber Liquidators Holdings Inc. (LL) reduced its full-year
comparable stores outlook to "approximately flat." Lumber
Liquidators shares were falling 10%.
Shares of IAC/InterActiveCorp. (IAC) advanced 11% toward a
record, as a big rally in Match Group Inc.'s stock (MTCH) helped to
provide a boost.
Shares of home-security-camera company Arlo Technologies Inc.
(ARLO) finished down 17.8% after the company reported
better-than-expected results for its second quarter but delivered a
disappointing outlook for the third quarter.
Read:September rate cut 'fully priced', with Trump tariff tweets
seen pushing Fed to take more action
(http://www.marketwatch.com/story/september-rate-cut-fully-priced-with-trump-tariff-tweets-seen-pushing-fed-to-take-more-action-2019-08-02)
What other assets are in focus?
Gold for December delivery notched a fourth straight gain,
breaching a psychological level above $1,500 per ounce
(http://www.marketwatch.com/story/gold-price-breaches-psychological-mark-above-1500-as-precious-metal-soars-2019-08-07).
(http://www.marketwatch.com/story/gold-steady-near-6-year-high-as-stocks-seen-bouncing-back-from-worst-day-of-2019-2019-08-06)
Oil futures tumbled
(http://www.marketwatch.com/story/oil-flirts-with-bear-market-territory-as-trade-jitters-cloud-demand-outlook-2019-08-07).
U.S. oil prices fell 4.7% at $51.09 a barrel on the New York
Mercantile Exchange, pushing the commodity into bear-market
territory, commonly defined as a drop of at least 20% from a recent
peak.
In Asia, Japan's Nikkei 225 Index fell 0.3%, Hong Kong's Hang
Seng Index ended virtually unchanged, adding less than 0.1%, while
the CS1 300 index dropped 0.4%
(http://www.marketwatch.com/story/asian-markets-sink-as-us-china-trade-tensions-ramp-back-up-2019-08-01).
The pan-European Stoxx 600 , meanwhile, headed 0.4% lower
Wednesday, giving up a sharply early gain.
(END) Dow Jones Newswires
August 07, 2019 16:25 ET (20:25 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Aug 2024 to Sep 2024
FTSE 100
Index Chart
From Sep 2023 to Sep 2024