Tech sector helps lead U.S. stocks higher
Fed head signals possible rate cut
Stocks finished higher Wednesday as Wall Street welcomed new signals suggesting the Federal Reserve is ready to cut interest rates for the first time in a decade.
Technology stocks drove much of the gains, nudging the Nasdaq composite to an alltime high. The benchmark S&P 500 index briefly traded above 3,000 for the first time before pulling back to just below its most recent record high a week ago.
The market climbed early on after Fed Chairman Jerome Powell said that many Fed officials believe a weakening global economy and rising trade tensions have strengthened the case for a rate cut.
Powell’s remarks, which he delivered as part of his semiannual monetary report to Congress, allayed investors’ concerns that an unexpectedly strong U.S. jobs report on Friday might give the Fed reason to stay put on interest rates.
“Investors are increasingly confident that the Fed will cut rates by a quarterpoint at the end of the month, which most investors expected,” said Kate Warne, chief investment strategist at Edward Jones. “This removed a little bit of the uncertainty there, and that’s why we’re seeing stocks move higher.”
The S&P 500 index rose 13.44 points, or 0.5 percent, to 2,993.07. The index, which set three record highs last week, is now less than 0.1 percent below its alltime high set last Wednesday.
The Dow Jones Industrial Average gained 76.71 points, or 0.3 percent, to 26,860.20.
The Nasdaq climbed 60.80 points, or 0.7 percent, to 8,202.53, a record. It’s previous record high was also set last Wednesday.
The Russell 2000 index of smaller company stocks rebounded from a brief slide, gaining 2.46 points, or 0.2 percent, to 1,565.05.
Major stock indexes in Europe closed mostly lower. The dollar fell and the price of gold rose.
The U.S. stock market rallied through much of June after the Fed first signaled that it might cut rates if necessary to shore up the U.S. economy.
Powell’s testimony before the House Financial Services Committee on Wednesday came at a time when the U.S. economic landscape is mixed. While the job market appears resilient and consumer spending and home sales look solid, the economy is likely slowing. And the U.S. trade disputes have added uncertainty to the economic outlook.
In his prepared statement, Powell said that since Fed officials met last month, “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Meanwhile, inflation has fallen farther from the Fed’s target.
“It makes it so odd to think that we actually need to have this kind of stimulus from the Fed to continue this expansion,” said Terry DuFrene, global investment specialist at J.P. Morgan Private Bank. “But the fact is you’re starting to see some of those signals out there. The economy could start slowing and the Fed just wants to get ahead of that.”
The Fed’s benchmark rate currently stands in a range of 2.25 percent to 2.5 percent after the central bank raised rates four times last year. Many investors have put the odds of a rate cut this month at 100 percent.
A quarterpoint cut in interest rates, which many investors expect, isn’t likely to have a big impact on consumers’ credit cards or mortgage rates. But it would reassure markets that the Fed would be open to further rate cuts if more signs of weakness in the global economy emerge, Warne said.