- The Dow Jones Industrial Average DJIA, +2.06% rallied around 512 points, or 2.1%, to end near 25,332.
- S&P 500 SPX, +2.14% added around 59 points, or 2.1%, to end near 2,803.
- The Nasdaq Composite COMP, +2.65% put on around 194 points, or 2.6%, to finish near 7,527.
Wall Street was bouncing back on Tuesday, with the DJIA closing a recent gap on the charts and moving back towards channel resistance. Investors factored in an easing policy risk from the Federal Reserve following yesterday’s uber-dovish commentary from James Bullard and comments from Chairman Jerome Powell, who also hinted at a conditional easing bias.
There were some signs of easing trade tensions and the remarks from Powell were taken as opening the door to a rate cut if the economy slows.
The Federal Reserve will respond “as appropriate” to the risks posed by a global trade war and other recent developments, Fed Chairman Jerome Powell said on Tuesday in remarks that seemed to open the door to the possibility of a rate cut.
Other key points from Powell today
** Fed’s Powell says with economy growing, unemployment low, inflation low and stable, it’s right time to rethink long-run strategies.
** Powell sees much higher likelihood rates will fall to effective lower bound in a downturn.
** Powell says Fed takes seriously the risk that persistent inflation shortfalls could reduce inflation expectations.
** Powell says ‘dot-plot’ of Fed rate forecasts has distracted attention from how Fed will react to unexpected events.
** Powell says in times of uncertainty, median Fed rate forecast might best be thought of as ‘least unlikely’ outcome.
Commenting in the Fed noise, analysts at ANZ Bank had the following to say:
The tone from senior FOMC members lately is that market pricing for rate cuts is out of whack with the data and the market may be running ahead of itself. There are currently more than two cuts priced into the US curve this year. Overnight, Fed Chair Powell indicated an openness to rate cuts if the trade war escalates and starts to impede economic activity. But that is not the Fed’s central case view. Powell said that he sees the economy as growing with unemployment low and inflation stable. Several other Fed officials reiterated a similar message.
DJIA levels
The DJIA remains below the 23.6% Fibo around 25550 although has closed above the 10. May double bottom lows at 25230 that exceed the 11th March lows just below at 25208. However, although the index has pretty much closed the 28th May gap, the index has not managed to get above those lows at 25349 – The high on Tuesday was 25343. 25430 is where the 200- EMA is located and then a break there opens 4th March fractal low at 25624 above the 23.6% Fibo. Bears can look towards 24500s and then 50% of the upside run made at the end of Dec at 24150.
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