Markets Reaching All-Time Highs on Powell’s Monetary Policy Testimony

Stocks are traded at record highs Wednesday morning after affirmation of the market expectation that a Fed rate cut is coming. Federal Reserve Chair Jerome Powell strengthened the case for easier monetary policy, and the market responded. 

The S&P 500 gained 0.6% to cross above 3000 for the first time in history, led by the energy and tech sectors.  The Nasdaq Composite reached an all-time high, gaining 1% quickly on Wednesday morning. Lastly, the Dow Jones Industrial Average gained 195 points, driven by Chevron and American Express. 

The Fed acknowledged the potential for rate cuts in the near future at the monetary policy meeting in June. 

However, despite the good news on the rate cut front, not all that Powell unveiled on Wednesday was as positive. 

Powell noted that business investments across the country have slowed “notably” recently as Americans remain wary of the economic status of the country. Many Americans are optimistic regarding the short run economy, but many are pessimistic when it comes to the long run economy. 

“Inflation has been running below the Federal Open Market Committee’s (FOMC) symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook,” Powell said in his testimony. Powell ensured the House Financial Services Committee that the central bank will “act as appropriate” to maintain economic expansion. 

The ongoing trade war between the United States and China, which has been lingering over the economy for more than a year, is playing a large role in the slight economic turmoil facing the United States. Much of the volatility in the American economy is due to fears of a negative report on the trade war with China. Despite the lingering trade war, the stock market continues to perform at a high level, and the United States has been able to avoid any seriously detrimental economic turmoil. 

Powell in his testimony “fully endorsed the July rate cut and did absolutely nothing to pull the markets back from that expectation,” said Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group. “There was little in the statement to imply what this means past the July meeting, but we can infer that any further softening in the data past July will likely mean more action from the Fed at subsequent meetings.” Powell’s endorsement of the July rate cut is the catalyst for markets reaching all-time highs on Wednesday. 

2 Comments
  1. Reggie Ortiz 5 days ago
    Reply

    market is due for another pullback, just waiting to catch the dip…

  2. Zia Marcus 5 days ago
    Reply

    Nothing day in credit. IG CDX a tad wider, while both IG and HY cash spreads a bit tighter. Strong day of issuance – $10b plus
    $SPY $QQQ $IWM

Leave a Comment