Markets shrug off Trump inquiry
St. Louis Federal Reserve Bank president James Bullard said on Wednesday he does not expect the impeachment inquiry into President Donald Trump to affect how the Fed conducts monetary policy.
Bullard said in an interview with CNBC that Fed officials are used to dealing with political uncertainty as a backdrop to policy deliberations. “This doesn’t sound all that different to me,” he said.
The S& P 500 notched its biggest daily gain in two weeks on Wednesday as investors shrugged off the news of the impeachment inquiry.
Stocks rose as investors digested the news, recovering from losses on Tuesday as the impeachment push gained momentum.
“We ’ l l see what the Democrats do from here, whether they move forward or not. It just doesn’t appear that it’s going to be the distraction that yesterday the market thought it might become. So the market’s having a good day based on that,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
Helping sentiment, data showed that sales of new U. S. single- family homes rebounded more than expected in August, a sign that the struggling housing market was starting to get a lift from lower borrowing rates.
The Dow Jones Industrial Average rose 0.61 per cent, to 26,970.71, the S&P 500 gained 0.62 per cent, to 2,984.87 and the Nasdaq added 1.05 per cent, to 8,077.38. Among the top performers were technology and communication services. The S& P 500 technology index was up 1.2 per cent, while the Philadelphia chip index gained 1.8 per cent.
“Good economic data is fighting with political noise and good data is winning,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.
Bullard, who dissented on the Fed’s rate reduction last week because he favoured a deeper cut, also reiterated his view that the Fed’s target rate should be reduced by an additional quarter of a percentage point by year-end.
“We’ve made a big move,” he said. “I think we could do a little bit more.” Still he said he doesn’t want to make a judgment before the next meeting and that his decision will depend on economic data.
In response to a question about Boston Fed president Eric Rosengren’s view that low rates could encourage people and businesses to take excessive risk, Bullard said the risks seen today are not on the same magnitude as the risks encountered in the late 1990s and mid-2000s.
Bullard called the trade war with China the “biggest issue” in the economy. He said the dispute became more “pernicious” than expected and added it could be “a while” before agreements are reached.
“I think the Chinese might have incentive to wait out this administration,” he said.