Nasdaq hits new high on possible US Fed rate cuts

The New York Stock Exchange on Wall Street. The Nasdaq Composite Index, Dow Jones Industrial Average and S&P 500 surged to all-time intra-day records on Wednesday, following the release of United States Federal Reserve chairman Jerome Powell's congre
The New York Stock Exchange on Wall Street. The Nasdaq Composite Index, Dow Jones Industrial Average and S&P 500 surged to all-time intra-day records on Wednesday, following the release of United States Federal Reserve chairman Jerome Powell's congressional testimony.PHOTO: AGENCE FRANCE-PRESSE

US markets rally following Fed chief's dovish report; European and Asian stocks also climb

NEW YORK • The Nasdaq rose to a record high on Wednesday as US stocks rallied, following dovish comments from United States Federal Reserve chairman Jerome Powell that opened the door to an interest rate cut.

All three major indices surged to all-time intra-day records after Mr Powell's written congressional testimony was released, but the tech-rich Nasdaq Composite Index was the only one to hold the record, ending at 8,202.53, up 0.8 per cent.

The Dow Jones Industrial Average rose 0.3 per cent to 26,860.20, while the S&P 500 added 0.5 per cent at 2,993.07 after earlier rising above 3,000 points for the first time.

European equities climbed alongside Asian stocks yesterday. The Stoxx Europe 600 Index headed for the first gain in five days, with energy companies leading the way.

However, US stock futures pared gains and Treasuries retreated after the latest American inflation reading came in higher than anticipated.

Contracts for the S&P 500 came off their highs, but the gauge still looked poised to test the milestone mark of 3,000 again as investors weigh the latest clues on the path for monetary policy.

Meanwhile, the dollar was stuck at a five-day low yesterday, though investors were wary of selling dollars aggressively until a policy review later this month.

This year's rallies across stocks, bonds and credit got a fresh jolt on Wednesday, thanks to comments from Mr Powell which persuaded investors that rates are headed lower by at least a quarter-point this month.

Mr Powell said many central bankers believed the case for lower rates "had strengthened".

Since last month's meeting, when Mr Powell's dovish remarks were interpreted as signalling a possible cut, "it appears that uncertainties around trade tension and concerns about the strength of the global economy continue to weigh on the US economic outlook", he said.

Mr Timothy Moe, chief Asia-Pacific regional equity strategist at Goldman Sachs, said: "There has been a total shift in monetary policy - quantitative tightening is off the table and we're back to some mild form of quantitative easing or stable central bank balance sheets. That's very supportive for equities."

Ms Maris Ogg from Tower Bridge Advisors thinks the Fed will undertake a 25 basis point cut in interest rates this month.

"But a cut of 50 basis points is not gonna happen," she said. "We're not seeing that much weakness and it would indicate that something is not working well."

Following Mr Powell's testimony, most investors still predicted a smaller interest rate cut but a solid minority bet on a larger 50 basis point cut.

Large tech shares gained 1 per cent or more on Wednesday, including Apple, Amazon and Google parent Alphabet.

Other tech companies with big rises included Tesla, which jumped 3.9 per cent, and Micron Technology, which advanced 3.8 per cent.

Petroleum producers were another buoyant sector, with ConocoPhillips and Devon Energy both winning more than 2 per cent.

But Levi Strauss & Co fell 12 per cent after second-quarter profit margins came in lower than expected.

American Airlines climbed 1.8 per cent as it lifted a key revenue benchmark, even though it said the grounding of the 737 Max would lower second-quarter profits by US$185 million (S$251 million).

Elsewhere, oil gained on crude output cuts ahead of a potential hurricane in the Gulf of Mexico.

Gold rose for a third day yesterday, with bullion trading above US$1,400 an ounce.

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 12, 2019, with the headline 'Nasdaq hits new high on possible US Fed rate cuts'. Print Edition | Subscribe