MDR McDermott International Inc

By Mark DeCambre, MarketWatch

Shares of Microsoft buoy the blue-chip index

U.S. stocks headed modestly higher Thursday afternoon as investors weighed better-than-expected housing and manufacturing data, a day after the second interest rate cut of 2019 by the Federal Reserve on Wednesday that is intended to forestall sluggish global economic growth and thwart the impact of President Trump's trade policies.

How are markets performing?

The Dow Jones Industrial Average rose 57 points, or 0.2%, at 27,204, the S&P 500 index climbed 8 points, or 0.3%, at 3,015, supported by gains in technology (XLK) and communications services (XLC) , while the Nasdaq Composite Index added 23 points, or 0.3%, at 8,201.

The S&P 500 index is back up to within 1% of its record high but Friday is quadruple witching day for U.S. markets when the quarterly expiration of futures and options on indexes and stocks occurs on the same day, sometimes spurring volatility.

What's driving the market?

A report on the U.S. housing market and manufacturing data in the Philadelphia area helped to hearten investors about the state of the U.S. economy on Thursday, following the Fed's decision.

Existing-home sales rose (http://www.marketwatch.com/story/existing-home-sales-rise-13-in-august-half-the-growth-rate-compared-to-a-year-ago-2019-09-19) 1.3% in August from the previous month to a seasonally adjusted annual rate of 5.49 million, the National Association of Realtors said, marking the strongest pace of sales since March of last year.

And the Philadelphia Federal Reserve's manufacturing index (http://www.marketwatch.com/story/philly-fed-manufacturing-index-drops-to-120-for-september-but-tops-forecasts-2019-09-19) fell to 12.0 in September after registering a reading of 16.8 in August, but was above forecasts for a reading of 10 by economists polled by MarketWatch. Any reading above zero indicates improving conditions.

"Economic data has been drifting stronger," Karyn Cavanaugh, senior market strategist, Voya Investment Management, told MarketWatch in a phone interview. "Overall, economic data is looking a little bit better and we had no surprises from the Fed," she said.

The Fed cut interest rates by a quarter percentage point to a range of 1.75% to 2% Wednesday afternoon (http://www.marketwatch.com/story/fed-decision-and-jerome-powell-press-conference---live-blog-and-video-2019-09-18), as expected. However, three of the 10 members of the rate-setting Federal Open Market Committee dissented, marking the highest number of dissenters since 2016, and raising doubts that the FOMC would deliver further hoped-for cuts to benchmark rates this year or kick off a new round of bond buying.

Investors had been anticipating that the Fed would follow the European Central Bank's lead by communicating an appetite for more accommodative monetary policy amid the U.S.-China trade dispute and slowing international economy. Fed Chairman Jerome Powell has emphasized that the U.S. economy is slowing but healthy.

"The ECB gave the Fed the opening to act more aggressively, but the FOMC just isn't ready to take that step," wrote Steven Blitz, chief economist at TS Lombard, in a Thursday research report.

"Powell has a split at the FOMC he has yet to bridge. There are those who believe the global situation risks slowing the US economy and unleashing disinflation versus those who view the world as background noise and focus on domestic variables as the key determinant of fed funds policy and see the US economy doing just fine, thank you," he said.

The Fed's move came before the Paris-based OECD in a Thursday report underscored (https://www.oecd.org/newsroom/oecd-sees-rising-trade-tensions-and-policy-uncertainty-further-weakening-global-growth.htm) that intensifying tariff disputes have stalled economic growth world-wide. "Escalating trade conflicts are taking an increasing toll on confidence and investment, adding to policy uncertainty, aggravating risks in financial markets and endangering already weak growth prospects worldwide," the OECD forecasts said.

Meanwhile, the New York Federal Reserve held its third repurchase auction in as many days on Thursday, injecting a further $75 billion into the financial markets by buying securities from Wall Street dealers, an attempt to keep short-term rates from soaring due to a lack of liquidity

On Wednesday, at the post-decision news conference, Powell said "it is certainly possible that we'll need to resume the organic growth of the balance sheet sooner than we thought," in response to the liquidity shortage.

Bond yields were little changed on Thursday in the wake of that decision. The 10-year U.S. note ticked down one basis point to 1.77, and the 2-year note rose by one, to 1.75.

On the international trade front, Chinese and U.S. delegates are meeting Thursday and Friday (https://www.bloomberg.com/news/terminal/PXZXSA6JTSE8) ahead of higher-level meetings expected early October to resolve the year-long trade dispute.

The prospect for progress between the two sides appeared to buoy shares of technology companies across the board, with Advanced Micro Devices (AMD) up 1.3% and (MU) p 0.6%.

Elsewhere in economic reports, U.S. initial jobless claims rose 2,000 to 208,000 in the seven days ended Sept. 14, the government said Thursday. Claims fell a revised 13,000 to 206,000, a nearly five-month low, in the prior week.

Which stocks are in focus?

Microsoft Corp. shares (MSFT) climbed on Thursday (http://www.marketwatch.com/story/microsoft-board-hikes-dividend-11-oks-40-billion-in-buybacks-2019-09-18)after the technology giant announced that its board approved a $40 billion share buyback and increased its dividend by 11%.

Shares of Datadog Inc. Cl A were set to make a public debut later Thursday. The cloud-monitoring company made received a buyout bid from Cisco Systems Inc. ahead of its initial public offering (http://www.marketwatch.com/story/cisco-tried-to-scoop-up-datadog-before-ipo-but-got-rebuffed-report-2019-09-18), according to reports.

AT&T's stock (T) was in focus after the Wall Street Journal reported (https://www.wsj.com/articles/at-t-explores-parting-ways-with-directv-11568841544?mod=hp_lead_pos2) that it was exploring a sale of part of its DirecTV satellite service. Shares of the telecom company were up 1%.

Shares of McDermott International Inc.(MDR) slid more than 20% amid heavy trading (http://www.marketwatch.com/story/mcdermotts-stock-tumbles-again-on-heavy-volume-toward-16-year-low-2019-09-19), amid fears that the provider of engineering and construction services to the energy industry may be mulling a bankruptcy after reports that it hired a turnaround consultant. The company denied that rumor.

How did other markets trade?

Read: Saudi oil attack shows bond traders are worrying more about growth than inflation (http://www.marketwatch.com/story/saudi-oil-attack-shows-bond-traders-are-worrying-more-about-growth-than-inflation-2019-09-16)

In commodities, West Texas Intermediate crude for October delivery the U.S. benchmark contract, rose 54 cents, or 0.%, to $58.65 a barrel on the New York Mercantile Exchange, on concerns that Saudi production will be slow to return after last Saturday's attacks (http://www.marketwatch.com/story/oil-rebounds-as-doubts-emerge-over-saudi-arabias-ability-to-bounce-back-from-attacks-2019-09-19). On Monday, it posted the largest daily gain for the most-active contract since Sept. 22, 2008 and finished at its highest level since May, according to Dow Jones Market Data.

Gold prices fell $9.80, or 0.7%, at $1,506.00 an ounce, while the U.S. dollar, as measured by the ICE U.S. Dollar Index , a gauge of the buck against a basket of leading rivals, receded by 0.2%.

In Asia overnight, Hong Kong's Hang Seng Index fell 1.1%. China's CSI 300 Index gained 0.4%, and Japan's Nikkei 225 index rose 0.4%.

In Europe, the Stoxx Europe 600 headed 0.5% higher.

(END) Dow Jones Newswires

September 19, 2019 13:02 ET (17:02 GMT)

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