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Stocks End Higher as Fed Hits Pause Button on Further Rate Cuts; Trade Talks Take Center Stage

James Hyerczyk

The major U.S. stock indexes finished higher on Tuesday after chopping around for a couple of hours, following the U.S. Federal Reserve’s decision to cut its benchmark interest rate while hitting the pause button on any future moves.

The Fed lowered its policy rate by a quarter of a percentage point to a target range between 1.50% and 1.75%, but dropped a previous reference in its statement to “act as appropriate” to support the economic expansion and prevent the threat of a global economic slowdown from sending the country into recession. This comment also likely means the Fed may hold off on future rate cuts.

The financial markets wanted a 25 basis point rate cut and they got it. The sideways price action after the news was released suggests investors believe the Fed is close to being done with their cuts.

On Wednesday, the benchmark S&P 500 Index settled at 3046.77, up 9.88 or +0.33%. The blue chip Dow Jones Industrial Average finished at 27186.69, up 115.27 or +0.43% and the technology-based NASDAQ-100 Index closed at 8303.98, up 27.13 or +0.34%.

Focus Shifts to Trade Talks

Hopes of a rate cut and recent optimism around the trade talks had helped drive the S&P 500 Index and the NASDAQ Composite Index. Now that the rate cut wish has been fulfilled, it’s now up to the trade deal to continue to carry the markets higher.

Reuters reported Tuesday, citing an unnamed U.S. administration official as saying an interim trade agreement between the U.S. and China might not be completed in time for signing in Chile next month. The news outlet also said Wednesday the Trump administration’s demand that Beijing commit to buying more U.S. agricultural products has become a major sticking point in negotiations.

Chile Cancels International Summit

Well investors won’t have to worry anymore about a trade deal being signed or not being signed in Chile next month. That’s because Chile called off the Asia-Pacific Economic Cooperation (APEC) summit in Santiago in mid-November.

President Donald Trump and Chinese leader Xi Jinping were scheduled to meet at the gathering to discuss a possible “phase one” deal that the two countries are close to finalizing.

The cancellation was due to protests, according to Chilean President Sebastian Pinera.

Now What?

The decision by Chile to cancel the summit brings up the question of when the leaders of the U.S. and China will meet to sign a much-needed trade deal.

A White House spokesman told CNBC that APEC doesn’t have a secondary site prepared, but the U.S. and China will still be working to bring the partial deal to conclusion.

“We look forward to finalizing Phase One of the historic trade deal with China within the same time frame, and when we have an announcement, we’ll let you know,” the spokesman said.

This article was originally posted on FX Empire

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