US Stock Market Overview – Stocks Rally Led By Smallcaps, Apple Drives the Nasdaq Higher

PPI comes in hotter than expected
David Becker
Bull - Wall St
Bull – Wall St

US stocks moved higher on Wednesday led by a 2% rally in the Russell 2000. The Nasdaq was the best performing of the 3-major sectors. Apple was one of the best performing technology shares, as the company rallied more than 3% putting its market cap above 1-trillion. All sectors were higher on Wednesday led by Utilities and Materials, Real-estate was the worst-performing sector. President Trump took to his Twitter feed, saying that the Fed should reduce interest rates to zero. He went as far as calling the Fed official boneheads. The President went on to say that the US should always have the lowest rates around the globe.

Trump Wallets the Fed

President Trump tweeted on Wednesday that the Fed should cut interest rates to zero or even set negative interest rates. The president also called Fed officials “boneheads” in the tweet. The President is concerned that without lower rates he will either have to give up his battle with China or face a recession. For the time being, he is attempting to bully the Fed into cutting rates. Unfortunately, zero interest rates would hammer savers in the US. Lower rates help markets, but savers who rely on higher rates for their savings accounts would get destroyed.

US Producer Price Rose More than Expected

The UP PPI index unexpectedly rose in August and underlying producer prices rebounded. The Labor Department reported that its producer price index for final demand edged up 0.1% last month as a jump in the cost of services offset the largest drop in the price of goods in seven months. That followed a 0.2% gain in July. On a year over year basis, August PPI advanced 1.8% after increasing 1.7% in July. Expectations had been for PPI to remain unchanged in August and rise 1.7% on a year-on-year basis. Excluding the volatile food, energy and trade services components, producer prices jumped 0.4% last month after dipping 0.1% in July, the first decline since October 2015. The core PPI climbed 1.9% in the 12 months through August after increasing 1.7% in July.

The ECB is on Deck

New stimulus from the ECB could further buoy US stocks. Ahead of the meeting the market seemed confident in a rate cut and the introduction of quantitative easing, which is the central bank bond purchase program. European rates have declined and are counting on the acknowledgment of asset purchases. Failure to do this would likely lead to a rise in European rates.

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