PRESS ROOM
US Equity Markets’ mixed reaction.
Sunday 14th July '19
While the large cap indices represented by the S&P 500 Index and the Dow Jones Index attained record highs at 3,000 and 27,000 points respectively, the smaller cap Indices posted modest losses. Technology stocks represented by the Nasdaq Composite Index ended the week as the best year to data performer among US Indices posting 24% gains helped by gains among the chipmakers. The release of the Federal Reserve (Fed) chairman Jerome Powell’s testimony to the House Financial Services Committee was the main reason behind the strong performance US stocks. Powell was slated to tell the committee that “uncertainties surrounding trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook. Bad news become the good news as it provided investors with further signs that the tentative resumption of US-China trade talks and string June payrolls won’t be enough to derail the Fed from additional rate cuts.
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Expectations of a rate cut at the Fed’s July 30-31 Meeting continued to dominate market sentiment. However, it looks like the recent positive economic data has dampened the odds of a 50Bps rate cut to only 21% according to the CME Group. Economic data last week surprised on the upside. The labour department reported that the core (excluding food and energy) inflation rose 0.3% in June versus consensus expectations for a 0.2% gain. Data showed that producer price inflation and consumer price inflation also increased more than expected. Inflation is within control and the market is pricing in another 2 to 3 rate cuts within the next 6 months. Weekly jobless claims fell to a 5-decade low. On the flip side, Small business sentiment snapped its winning streak of gains over the past 5 months. The positive data sent the yield on the benchmark 10-year Treasury note to its highest level in a month.