US Stock Market Overview – Stock Close Mixed as Fed Appears Divided

Stock rise as Fed cuts rates 25-basis points
David Becker
Federal Reserve, Washington DC

Stocks prices whipsawed and then moved higher following the Fed decision. The cut was widely expected, and commentary made market participants believe that additional cuts during the balance of 2019 were less likely.  Sectors were mixed, led down by energy shares, financials and utilities were the best performing sectors in the S&P 500 index.

The Fed Cuts Rates as Widely Expected

The Fed cut the Fed Fund rate by 25-basis points to a range between 1.75%-2.0%. which was widely expected. There were 3-dissents. Two of those dissents were for not interest rate cut at all and 1, was for a 50-basis point cut. The Fed is divided. Of the 12-FOMC members, 5-who were not voting members, would not vote for another cut this year. Of the total 12-members, 7-see room for another cut in 2019, and 5-see rates unchanged. Yields edged higher which buoyed the US dollar.

Growth and Jobs Forecasts Remain Upbeat

During the following press conference, Fed Chair Jerome Powell said that hey expects the job market to remain strong and for growth to continue at a moderate pace. Global develops and the uncertainty surrounding trade is what made a rate cut appropriate. Powell also said that interest rates have moved considerably this year. He also said that participants on the Fed only believe there will be small chances to interest rates over the coming year. He also discussed the issues related to repurchase operations given the tightness of the Federal Funds rate. The statement noted household spending had been rising at a strong pace while business investment and exports had weakened. Some Fed officials have warned that waiting for signs of consumer spending and hiring to slow more sharply could require the Fed to deliver more aggressive stimulus at a time when its policy rate is already historically low.

Trump Wants the Fed to Do More

President Trump took to Twitter shortly after the Fed’s decision. He again hammered the Fed as not knowing what they are doing and not having a long-term vision. After the Fed rate cut the market quickly turned to focus on what will happen in the future. The yield differential moved in favor of the dollar as traders began to buoy US yields related to foreign yields. The dot plots were nearly unchanged, and the Fed lower the excess reserve rate which is also a stimulus.

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