S&P 500 Dives After Fed’s Official Rate-Cut Move
The S&P 500 marked the day with its biggest single movement drop in two months after the news of the Federal Reserve cutting interest rates officially. Fed Chair Jerome Powell cautioned that the recently-delivered cuts would not spark an extension to the cutting of rates.
Stocks went downhill after an unusually restrained response from the market. The Fed cut the rates for the first time since the financial crisis of 2008. Investors also began peddling shorter-term Treasuries as they tried to decipher Powell’s message.
The S&P 500 ended 1.1% lower, pulling off its largest one-day splurge since May 31. The index fell as much as 1.6% during the day.
Similarly, the Dow Jones Industrial Average and the Nasdaq Composite both slumped 1.2%, also their biggest drop since May and June, respectively.
Stocks had been struggling to move past the neutral line before the Fed’s announcement. Investors also tried to make sense of the central bank’s decision to declare an early end to the shrinking of its balance sheet.
Before the Fed slashed interest rates, yields across the board were down, allowing government debt to step into optimistic territory.
Policy-sensitive two-year Treasury yield was higher by 2.4 basis points at 1.8721%. Earlier in the day, it floated around 1.81%, having jumped as much as 11.5 bps to 1.96% during Fed Chair Powell’s conference.
The benchmark 10-year Treasury yield was lower by 4.8 bps at 2.0144%. To compare to an earlier 2.03% prior to the official announcement of rate cuts.
U.S. stocks opened to a more bullish market after Apple’s report of strong earnings and brighter forecasts. The tech giant’s shares performed positively, carving out a 2% advance.
Indexes Amid Intensifying Global Concerns
Ahead of the Fed meeting, Europe’s Stoxx 600 ended the trading day at a level 0.2% higher.
Frankfurt’s Xetra Dax 30 added around 0.33%, while London’s FTSE 100 tripped to fall by 0.8%. Previously, the index outperformed on Tuesday strengthened by a weaker pound.
Come Wednesday, declines for stocks continued after U.S. President Donald Trump lambasted China as representatives from both countries recommenced trade talks.
Trump implied that the Chinese officials were not fully cooperating, reducing expectations of an agreement between the two parties materializing.
Asian equities maintained their exposure to the ambiguity of the trade dispute, susceptible to further collateral damage.
Over in mainland China, the CSI 300 decreased 0.9%, while Hong Kong’s Hang Seng index slumped 1.3% as protests for the anti-extradition movement persists.
Elsewhere, sterling inched 0.1% higher to $1.2164 as investors weighed the possibility of a no-deal Brexit executed by newly-elected Prime Minister Boris Johnson.
Furthermore, the Bank of England (BOE) second-guessed on the idea of calling an interest rate cut on Thursday. Borrowing cost ended unchanged amid an escalating threat of the “Hard Brexit.”
As the country moves forward with only about two months before leaving the E.U., the BOE’s Monetary Policy Committee (MPC), which is headed by Mark Carney, unanimously voted to keep interest rates at 0.75%.
The greenback pushed further as the dollar index ended 0.6% higher at 98.622, its highest since May 2017.
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