U.S. stocks closed mostly higher on Wednesday despite lingering concerns about a partial trade deal between the United States and China. Meanwhile, Fed Chairman Jerome Powell’s Congressional testimony, where he reiterated the central bank’s earlier stand of holding interest rate firm boosted investors’ confidence to some extent. Both the Dow and the S&P 500 posted fresh all-time highs while the Nasdaq Composite ended in the red.
The Dow Jones Industrial Average (DJI) gained 0.3% to close at 27,783.59. The S&P 500 increased 0.1% to close at 3,094.04. However, the Nasdaq Composite Index closed at 8,482.10, dropping 0.1%. The fear-gauge CBOE Volatility Index (VIX) increased 2.5% to close at 13. A total of 6.8 billion shares traded on Wednesday, roughly in line with the daily average over the last 20 sessions. Decliners outnumbered advancers on the NYSE by a 1.17-to-1 ratio. On Nasdaq, a 1.35-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory with 16 components of the 30-stock blue-chip index closing in the red while 14 ended in green. The Dow’s gained was primarily owing to 7.3% rise in the stock price of The Walt Disney Co. DIS after the company declared that it added 10 million customers for its recently launched Disney+ video streaming service. The Walt Disney carries 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 finished in the green after recording its 20th all-time high so far in 2019. The Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) gained 1.5% and 1%, respectively. Notably, five out of total 11 sectors of the benchmark index closed in the green while six finished in red. The tech-laden Nasdaq Composite ended in the negative territory due to poor performance of large-cap tech stocks.
Powell Reiterates Stable Monetary Policy
On Nov 13, in his testimony before the Joint Economic Committee of Congress, Fed Chair Jerome Powell reiterated the central bank’s stable monetary policy that it adopted immediately after the third rate cut on Oct 30.
Per Powell, “We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2% objective,”
In his latest policy statement on Oct 30, Powell dropped the phrase that Fed would “act as appropriate” to sustain expansion, and said instead that it “will assess the appropriate path of the target range” for fed funds. This clearly indicates the end of mid-cycle (insurance cut) monetary policy adjustment.
At the same time, the Fed Chair has also assured market participants that the central bank will not consider a rate hike until there is a sustained and significant uptick in inflation rate, which was remained muted at below 2% target rate of Fed so far in 2019.
Trade Impasse Continues
On Nov 13, The Wall Street Journal reported that the deadlock in the trade-related negotiation continues regarding withdraw of U.S. tariffs on Chinese goods and China’s earlier commitment about purchasing $50 billion agricultural products from the United States.
On Nov 12, President Donald Trump delivered a speech at the Economic Club of New York, where he said a U.S.-China trade deal “could happen soon,” and added that a phase one agreement is “close.” At the same time, he threatened more tariff hikes on Chinese imports if the trade negotiation fails to produce an interim agreement. Trump has categorically mentioned that he would only accept the interim trade deal if the agreement worked to the advantage of U.S. workers and businesses.
In a strong statement, he said “since China’s entrance into the World Trade Organization in 2001, no one has manipulated better or taken advantage of the United States more.” “I will not say the word ‘cheated,’ but nobody’s cheated better than China, I will say that.”
The Department of Labor reported that the consumer price index (CPI) for the month of October rose 0.4% higher than the consensus estimate of 0.3%. U.S. households paid more for energy products, healthcare, food and a range of other goods. Year over year, CPI grew 1.8% in October compared with 1.7% in September. The core CPI (excluding the volatile food and energy components) rose 0.2% as against 0.1% in the previous month. Year over year, the core CPI increased 2.3% compared with 2.4% in September.
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