US stocks approach record as Fed soothes Wall Street's fears

Reuters June 19 | Updated on June 20, 2019 Published on June 20, 2019

The S&P 500 approached a record high on Wednesday after the Federal Reserve signaled potential interest cuts later this year, reassuring investors worried that the US-China trade war could stall economic growth.

Saying it “will act as appropriate to sustain” economic expansion, the central bank signaled rate cuts of as much as half a percentage point over the remainder of 2019. In its statement following a two-day policy meeting, the Fed held rates steady, as expected, but dropped a previous promise to be “patient” in adjusting rates.

That elevated the S&P 500 and Dow Jones Industrial average to less than 1 per cent from their record high closes set in late April.

“We think the Fed delivered. It did no harm. It walked right up to a cut without doing it today. It'll likely be coming in July absent some big trade news or other news,” said John Augustine, chief investment officer at Huntington Bank in Columbus, Ohio.

Buoyed by growing confidence the Fed will cut rates, and by hopes of an end to the US-China trade war, US stocks have climbed in recent weeks. The S&P 500 has gained 6 per cent in June.

“At the end of the day what they (the Fed) want to do is give a nod to the market. Expectations had gotten so dovish that they need to give a nod to that, but at the same time not make any commitment and be forced to cut rates later on if conditions perhaps changed,” said Kristina Hooper, Chief Global Market Strategist at Invesco in New York.

The financial sector fell 0.2 per cent, with bank stocks dipping 0.2 per cent. Lower interest rates tend to hurt banks' profits. The Dow Jones Industrial Average rose 0.15 per cent to end at 26,504.27 points, while the S&P 500 gained 0.30 per cent to 2,926.44. The Nasdaq Composite added 0.42 per cent to 7,987.32.

Contributing more than any other stock to advances on the Nasdaq and S&P 500, Adobe Inc surged 5.2 per cent after the Photoshop software provider beat analysts' estimates for quarterly profit and revenue. Facebook fell 0.5 per cent as its ambitious plan to launch a digital currency faced a backlash from regulators and politicians in the United States and abroad.

The healthcare sector rose 1 per cent, helped by gains in UnitedHealth Group Inc, Pfizer Inc and Allergan Plc. Allergan jumped 6.2 per cent after the drugmaker said its constipation drug, jointly developed with Ironwood Pharmaceuticals Inc, improved symptoms in patients suffering from irritable bowel syndrome with constipation.

Advancing issues outnumbered declining ones on the NYSE by a 1.65-to-1 ratio; on Nasdaq, a 1.40-to-1 ratio favored advancers. The S&P 500 posted 48 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 63 new highs and 59 new lows. Volume on US exchanges was 6.5 billion shares, compared to the 6.8 billion average for the full session over the last 20 trading days.

Published on June 20, 2019
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