Markets closed in the red on Tuesday after Fed Chief Jerome Powell stated that the central bank was still not clear about reducing the benchmark interest rate. He stated that the Fed wanted to carefully monitor the economy and look for long-lasting weaknesses in order to avoid lowering interest rates in haste. The three major benchmarks closed in the negative territory.
The Dow Jones Industrial Average (DJI) decreased 0.7%, to close at 26,548. The S&P 500 decreased 1% to close at 2,917. The tech-laden Nasdaq Composite Index closed at 7,885, losing 1.5%. The fear-gauge CBOE Volatility Index (VIX) increased 3.5% to close at 15.80. Decliners outnumbered advancers on the NYSE by a 1.37-to-1 ratio. On Nasdaq, a 1.29-to-1 ratio favored declining issues.
How Did the Benchmarks Perform?
The Dow dipped 179 points to post its worst single-day drop since May 31. Losses for the 30-stock index were broad. Shares of Microsoft MSFT and Nike NKE declined 3.2% and 2.2%, respectively and weighed on the Dow. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 lost 28 points to end in negative territory. Of the 11 major sectors of the S&P 500, 10 ended in the red, with communication services and technology stocks leading the decliners. Communication Services Select Sector SPDR Fund (XLC) and Technology Select Sector SPDR Fund (XLK) decreased 1.9% and 1.8%, respectively on Monday.
Meanwhile, the Nasdaq dropped 121 points to also close in the red for the third consecutive session. Losses for the Nasdaq were broad-based. Further, shares of Adobe ADBE dipped 4% and weighed on the Nasdaq.
Comments from Powell and Bullard Weigh on Markets
Speaking at the Council on Foreign Relations in New York on Jun 25, Fed Chief Jerome Powell acknowledged that the economy is reeling under pressures from trade war uncertainties as well as a slowdown in the global economy.
He stated that while such factors continued to weigh on the outlook for the economy, members of the Fed were not sure if these factors would continue weighing “on the outlook and thus call for additional policy accommodation.” However, Powell also stated that “many FOMC participants” believed that the current scenario has strengthened a case for an accommodative policy.
Meanwhile, speaking on Bloomberg Television, St. Louis Fed President James Bullard stated that while he thinks that a quarter-point reduction in interest rates would be an “insurance” move, a half-point rate cut would be “overdone.” He said that he doesn’t see the need “to take huge action."
Such comments weigh on the markets as Fed is still unsure about the possibility of a rate cut in July. Meanwhile. CME’s FedWatch tool predicts a 26.1% probability of a rate cut in July.
Lighthizer and Mnuchin Speak to China’s Liu He
Per a Bloomberg report, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese vice premier Liu He on Jun 24 over the phone. Both the leaders told Liu He that they believed in continuing trade talks between both the countries.
Meanwhile, President Donald Trump and China’s Xi Jinping are likely to meet on Jun 29 during the G-20 meeting. Though investors hope that a trade truce will be achieved, experts opine that these hopes are misguided.
On the economic data front, per S&P’s CoreLogic Case-Shiller 20-city index, home prices in America rose a seasonally adjusted 2.5% in April from the year ago quarter. This marked the metric’s slowest pace of growth since August 2012 and its 13th monthly decline on the trot.
Meanwhile, U.S. consumer confidence for June came in at 121.5, lower than the consensus estimate of 131.2. Further, new home sales for May came in at 626,000, lower than the consensus estimate of 681,000.
Stocks That Made Headlines
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