US Stock Market Soaring on Fed Rate Cut Hopes

By midday, on Friday, US stocks pushed higher into record territory on the heels of Federal Reserve Chairman Jerome Powell concluded two days of congressional testimony to set the stage for an interest rate cut by the end of the month. 

With that, the Dow Jones Industrial Average rose 133 points, about half a percent, to 27,222.  Also, the Standard & Poors 500 Index added 6 points, about 0.2 percent, to 3,006.  Finally, the Nasdaq Composite Index rose 29 points, about 0.4 percent, to 8,225.

Perhaps more importantly, the Dow hit a brand new intraday high of 27,248.71. Similarly, the Standard & Poors also hit a new intraday high of 3,006.90.  

It is important to note that on Thursday the Dow Jones added 227.88 points, about 0.8 percent, to 27,088.88. This marks the indexes first close above 27,000.  By the end of the day on Thursday, the S&P 500 also pushed upward into record territory, moving forward 6.84 points, or 0.2 percent, to close out the day at 2,999.91.  And finally, again, the Nasdaq Composite came close to a record on Wednesday but pulled back nearly 6.5 points down on Thursday, to close at 8,196.04; that is a loss of 0.1 percent. 

All of this distills down to Powell’s testimony, on Thursday, which indicated that the US economy is [finally] in a “very good place” even though it only partially recovered from the “confidence shock” it suffered during the trade war with China, since May.  

In his testimony, Powell said, “We’re learning that interest rates—the that neutral interest rate—is lower than we had thought and I think we’re learning that the natural rate of unemployment is lower than we thought. So monetary policy hasn’t been as accommodative as we had thought.”

Fortunately for the US, though, China has a trade surplus—actually a record high over last year—which continues to put pressure on China to settle the ongoing tariff disputes.  

In addition to this, the US producer price index grew 0.1 percent in June with the cost of energy and other goods falling for the second straight month.  According to the US Department of Labor, this marks another PPI gain since May; the core PPI—a metric that excludes food and energy prices—grew 2.3 percent since the same time last year.