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SK8T3R215 06/20/19 4:11:32 PM #1: |
https://www.wsj.com/articles/stocks-extend-gains-after-the-fed-as-bond-yields-dip-11561017273?mod=article_inline&mod=hp_lead_pos1
The S&P 500 struck a new closing record Thursday, after the U.S. Federal Reserve suggested it would cut interest rates if the economic outlook doesnt improve in the coming months. The broad index rose 1% to 2954.19, topping its April 30 closing high. The Dow Jones Industrial Average climbed 250 points, or 0.9%, to 26753. The technology-heavy Nasdaq Composite added 0.8%. The rebound comes after trade tensions and uncertainty over central-bank policy rattled investors last month, with stocks posting their worst May since 2010. But the potential for thawing trade relations between Washington and Beijing have helped lift share prices this month, putting the S&P 500 on pace for its best June since 1955. Investors also received some clues from the Fed Wednesday on the direction of interest rates. Fed Chairman Jerome Powell said the bank will hold interest rates steady for now, but he dropped strong hints that further easing would be necessary if global trade tensions continue to damp economic growth. Many economists expect the Fed to propose a 0.25 percentage-point cut at its July meeting. The Bank of Japan and the Bank of England also both left their benchmark interest rates unchanged this week. The recent bounce in stocks comes as President Trump is set to meet with Chinese President Xi Jinping at the Group of 20 summit next week in Japan. The markets reaction after the Fed meeting is kind of crazy, said Jonathan Corpina, senior managing partner at broker-dealer Meridian Equity Partners. I would have thought things would have quieted down and investors would [have sold shares] after the recent run-up. But investors are now really banking on the G-20 summit. Stocks briefly eased from session highs in early-afternoon trading. One reason: A drop in bond yields weighed on financial stocks, which slipped 0.3% midday but ticked mildly higher in recent trading. A decline in bond yields, especially for longer-dated debt, tends to hurt bank stocks because their profit margins tend to expand when there is a bigger difference between short-term deposit costs and longer-term lending rates. U.S. 10-year Treasury yields briefly dipped below 2% for the first time since 2016, before recovering slightly, and was at 2.001% on Thursday, according to Tradeweb, from 2.023% Wednesday. Bond yields move in the opposite direction to prices. For the financial sector, theres a big overhang with the banks now because having lower rates isnt good for earnings growth, said R.J. Grant, director of equity trading at KBW Inc. Some investors had been positioning for a less-dovish Fed, buying some beaten-up corners of the market like financials thinking the Fed would be more hawkish. That didnt happen. More than anything, it set some positioning off kilter." Energy shares in the S&P 500 led the broader market higher Thursday, with the sector gaining 2%. Shares of U.S. oil producers rose, with Whiting Petroleum and Centennial Resource Development jumping 5.9% and 8.7%, respectively. The gains were driven by a sharp rise in oil prices after Iran said it shot down a U.S. military drone. U.S. oil prices rose 5.4% to settle at $56.65 a barrel. Risk is being embraced more following the Fed meeting, which is helping stocks broadly, said Justin Wiggs, managing director in equity trading at Stifel Nicolaus. The pop in crude prices has forced investors to take a look back at the energy space. The dollar dropped broadly against major currencies. The WSJ Dollar Index, which measures the dollar against a basket of currencies, fell 0.7%. Meanwhile, gold surged 3.6% to $1,392.90 per troy ounce as the prospect of lower interest rates spurred investors to seek returns from alternative assets. --- New York Knicks, New York Jets, New York Yankees. ... Copied to Clipboard!
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