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Shares rise after Fed Leaves Interest rates unchanged, Signals Possible cuts



  • The Dow Jones Industrial Average ended on the third straight day Wednesday after the Federal Reserve said it would keep interest rates stable.
  • Adobe (ADBE – Get Report) climbed after San Jose, Calif. beat Wall Street's second quarter earnings estimates. Adobe is Real Money's Stock of the Day.
  • U.S. Steel (X-Get Report) shares were advanced after the steel producer said it plans to idle two ovens in the United States and another in Europe, as demand is weakening and prices are falling.

Wall Street Summary

The stocks ended higher for the third straight day Wednesday after the Federal Reserve said it would keep interest rates stable while signaling that interest rate cuts might be needed soon due to signs of growing risks to the economy.

The announcement came at the end of the Federal Open Market Committees two-day meeting. Fed's ratios will remain at a range of 2.25% to 2.5%, according to a Fed's Monetary Committee statement chaired by President Jerome Powell. But the committee warned of "downside" risks for the current ten-year economic expansion, one of the longest in the United States history.

"We are ready to move and use our tools as necessary to sustain the expansion." Fed Chairman Jerome Powell said during a television press conference after the decision was announced. He added that the case "has strengthened" for more "accommodating" monetary policy.

Dow Jones Industrial Average rose 38 points, or 0.1

5% to 26.504, S & P 500 rose 0.30%, while Nasdaq developed 0.42%.

"We clearly hear a certain more deaf-born Fed, and while pointing to the pressure of the White House, it is key to remember that the Fed's focus has always been on two things and only two things: Jobs and Inflation, "says Mike Loewengart, vice president of investment strategy at E * Trade. "Jobs [are] is strong, so no worries on that front, but inflation has been consistent under Fed's goal, which would indicate that they have to act to get it back to where it should be. economic data, all other influences could be considered noise until the Fed feels that the economy is in the right place, with inflation as their guide. "

Jason Pride, private equity investment manager at Glenmede, said the Fed left rates unchanged, but "laid the foundation for a potential reduction in interest rates over the next three months."

"The language of the Fed's statement seems to set the stage for a potential cut in the rate of" patient "removal over the future monetary policy road, "Pride said. "The statement also indicates the committee's long-term flexibility and intention to" act appropriately "to maintain economic expansion. Such a move from the Federal Reserve could be characterized as an" insurance rate "cut, an interest rate that is not justified by lowering economic growth , but is instead intended to provide protection against potential but unpredictable risks. "

The main risk for the economic outlook, Pride said," remains the US-China trade relations – whether tensions continue to rise and more tariffs come into force or they return to the negotiating table. "

" There seems to be no major change in the economic outlook as inflation has been subdued and actually rejected from previous reports, "said Brian Pirri, head of the New England Investment & Pension Group. . "Stock markets and fixed income markets seemed to take this news positively when the Fed set the stage for possible easing later this year, either in July or September."

President Donald Trump, a constant critic of the Fed, has pushed for a cut in interest rates. On Tuesday, he suggested that Powell's future as head of the central bank could depend on his consent to lower interest rates. Powell said at Wednesday's press conference that he intends to serve his term.

"The law is clear that I have a four-year period and I intend to serve it," Powell said.

Trump has tried to "settle the rules" in global lower interest rate trading, and President Mario Draghi of the European Central Bank promised to restart the bank's 2.6 billion bond bond program if growth and inflation continue to slow.

Meanwhile, Trump said he would be meeting with Chinese President Xi Jinping later this month at the G20 summit in Osaka, Japan. The world's two largest economies are locked in a trade war, and Trump has threatened to charge $ 300 billion more in Chinese imports.

The Energy Management Administration said US crude supplies fell by 3.1 million barrels for the week ending June 14, after two consecutive weeks of gains.

Brent crude contracts for August delivery, the global benchmark, were 17 cents higher from their Tuesday close to New York and changing hands at $ 62.31 per day. barrel while West Texas Intermediate contracts for July, which are more closely linked to US gas prices, were 45 cents higher at $ 54.56 per barrel. barrel.

Adobe shares (ADBE – Get Report) rose 5.2% to $ 291.21 after San Jose-based software company had beaten Wall Street's second quarter. Adobe is Real Money's Stock of the Day.

U.S. Steel (X – Get Report) shares rose by 4.1% to $ 15.17 after the steel producer said it is planning to idle with two ovens in the US and another in Europe, as demand is weakening and prices are falling. .

Southwest Airlines shares (LUV – Get Report) slightly to $ 51.51 after the carrier increased the lower end of its second quarter earnings forecast, but noted that all 34 of its Boeing 737 MAX jets will remain grounded until at least September.

Jim Cramer: The One for sale prior to a Fed decision


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