open an account
Span Margin
Refer A Friend
open an account

US stocks close at record highs on dovish Fed hopes

image Dow up 0.67 per cent, S&P 500 up 0.77 per cent, Nasdaq up 0.75 per cent
U.S. stocks rose on Wednesday, with each of the major indexes closing at a record high, as expectations grew that the Federal Reserve would take a more dovish turn as a raft of data provided more evidence of a slowing economy.

Benchmark U.S. 10-year Treasury Note yields touched its lowest since November 2016 at 1.939 per cent, while euro zone yields tumbled to record lows on bets the European Central Bank's next chief would stay a dovish course.

Data on Wednesday showed the U.S. trade deficit jumped to a five-month high while services sector data showed a slowdown in activity. The reports come on the heels of data on housing, manufacturing, business investment and consumer spending that point to slowing economic growth in the quarter.

“The data has been mixed, it hasn’t been terrible, sort of a decline generally,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.

“Certainly the bond market is continuing to hit fresh yield lows so that is a message there is a definite slowing and the central banks will have to cut. I guess the equity markets are saying that is going to be OK.”

The Dow Jones Industrial Average rose 179.32 points, or 0.67 per cent, to 26,966, the S&P 500 gained 22.79 points, or 0.77 per cent, to 2,995.8 and the Nasdaq Composite added 61.14 points, or 0.75 per cent, to 8,170.23.

The defensive utilities, real estate and consumer staples rose the most among the 11 major S&P sectors as the falling bond yields made stocks that pay high dividends more attractive. The dividend yield for the broad S&P 500 and the 10-year Treasury are nearly identical.

Traders currently see a 29.7 per cent chance the Federal Reserve would cut borrowing costs by half a percentage point at its July 30-31 policy meeting, up from the 25 per cent perceived chance on Tuesday and 24 per cent a week ago. A cut of at least a quarter percentage point is viewed as a certainty.

Rising expectations for a rate cut, fuelled by softer economic data and comments from global central banks indicating a more dovish stance helped the S&P 500 and the Dow Jones indexes post their best June performance in decades.

The Atlanta Fed on Wednesday trimmed its second-quarter GDP growth view to 1.3 per cent on an annualized rate, down from 1.5 per cent on Monday.

Trading volumes were thin due to shortened trading hours on Wednesday ahead of the July Fourth holiday.

Additional data on the labour market showed the ADP National Employment Report, considered by some to be a precursor to the Labour Department's more comprehensive monthly non-farm payrolls data due on Friday, showed U.S. private employers added 102,000 jobs in June, well below economists' expectations........................BL

04-Jul-2019