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U.S. Stocks Seeing Further Upside On Optimism About Rate Cut

wallstreet aug13 05jun19 lt

Following the substantial rally seen in the previous session, stocks are seeing continued strength in morning trading on Wednesday. Buying interest has remained somewhat subdued, however, limiting the upside for the major averages.

Currently, the major averages are posting modest gains. The Dow is up 127.10 points or 0.5 percent at 25,459.28, the Nasdaq is up 3.26 points or less than a tenth of a percent at 7,530.38 and the S&P 500 is up 6.70 points or 0.2 percent at 2,809.97.

Stocks continue to benefit from optimism about an interest rate cut after Federal Reserve Chairman Jerome Powell's pledged to sustain the U.S. economic expansion.

Citing uncertainty surrounding trade negotiations and other matters, Powell said in a speech on Tuesday that the central bank will act "as appropriate" to support the economy.

Powell's comments were widely seen as an indication the Fed is prepared to discuss lowering interest rates if escalating global trade disputes weigh down economic growth.

However, the positive sentiment was partly offset by a report from payroll processor ADP showing much weaker than expected private sector job growth in the month of May.

ADP said private sector employment edged up by 27,000 jobs in May after spiking by a downwardly revised 271,000 jobs in April.

Economists had expected employment to increase by 180,000 jobs compared to the jump of 275,000 jobs originally reported for the previous month.

"Job growth is moderating," said Mark Zandi, chief economist of Moody's Analytics. "Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting."

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

Employment is expected to climb by 185,000 jobs in May after surging up by 263,000 jobs in April, while the unemployment rate is expected to hold at 3.6 percent.

Interest rate-sensitive utilities stocks are turning in some of the market's best performances in morning trading, resulting in a 1.6 percent advance by the Dow Jones Utility Average.

Considerable strength has also emerged among gold stocks, as reflected by the 1.1 percent gain being posted by the NYSE Arca Gold Bugs Index.

The strength in the gold sector comes amid a notable increase by the price of the precious metal, with gold for August delivery jumping $10.60 to $1,339.30 an ounce.

On the other hand, a decrease by the price of crude oil is contributing to weakness in the energy sector, as crude for July delivery is sliding $0.75 to $52.73 a barrel.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index jumped by 1.8 percent, while Hong Kong's Hang Seng Index rose by 0.5 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has edged down by 0.1 percent, the U.K.'s FTSE 100 Index is up by 0.1 percent and the French CAC 40 Index is up by 0.2 percent.

In the bond market, treasuries have pulled back off their highs of the session but continue to see modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1 basis point at 2.109 percent.

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