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US stocks fall, dollar rallies on cloudy US Fed outlook after rate cut
NEW YORK, Aug 1, 2019 (BSS/AFP) – Wall Street stocks tumbled on Wednesday
and the dollar rose to a two-year peak against the euro after the Federal
Reserve cut interest rates but offered mixed signs on what the move meant for
future monetary policy.
The US central bank, as had been well telegraphed in advance, moved ahead
with a 25-basis-point interest rate cut that it characterized an insurance
move against risks washing onto American shores from abroad, including from a
prolonged US-China trade war.
Stocks fell sharply midway through a subsequent news conference after Fed
Chairman Jerome Powell said the US central bank did not expect a “lengthy
cutting cycle.”
But Powell then went on to say the Fed was not committed to a single cut.
“Let me be clear. I said it’s not the beginning of a long series of rate
cuts. I didn’t say it’s just one or anything like that,” Powell said.
Major US indices recovered some from their session lows but still finished
solidly lower, with the Dow off 1.2 percent at 26,864.27.
The dollar also rallied against the euro, which fell below $1.11 for the
first time since May 2017.
– Confusing picture –
Powell did not do “a great job of selling the story of the rationale for
why they did the easing today,” LBBW’s Karl Haeling said.
“The bottom line is the market is concerned we might not be getting as
many rate cuts as they thought.”
The Fed’s decision came on the same day as another round of US-China trade
talks concluded without signs of significant progress.
One negative byproduct of Wednesday’s Fed decision is that it could boost
trade hawks in the Trump administration to take a hard line, said Art Hogan,
chief market strategist at National Securities.
“This is essentially monetary policy fixing the damage that trade policy
is doing,” Hogan said.
Elsewhere, European stocks finished mixed, while Asian bourses were
solidly lower.
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In another sign of fallout from the trade row, China reported a third
straight month of contraction in manufacturing, despite efforts to shore up
the sector.
The Purchasing Managers’ Index (PMI), a gauge of Chinese factory
conditions, came in at 49.7 for the month, slightly above Bloomberg forecasts
but below the 50.0 mark that separates growth from decline.
Among individual companies, Apple gained 2.0 percent after reporting
better-than-expected quarterly earnings after the close Tuesday, with strong
growth in services offsetting weak iPhone sales.
General Electric finished 0.7 percent lower following a volatile session
in which it reported a loss of $61 million but lifted its full-year forecast
on improvements in its struggling power business.
Executives said the prospects for US-China trade tensions and the grounded
Boeing 737 MAX remain uncertainties for future performance.
– Key figures around 2100 GMT –
New York – Dow: DOWN 1.2 percent at 26,864.27 (close)
New York – S&P 500: DOWN 1.1 percent at 2,980.38 (close)
New York – Nasdaq: DOWN 1.2 percent at 8,175.42 (close)
London – FTSE 100: DOWN 0.8 percent at 7,586.78 (close)
Frankfurt – DAX 30: UP 0.3 percent at 12,189.04 (close)
Paris – CAC 40: UP 0.1 percent at 5,518.90 (close)
EURO STOXX 50: UP 0.1 percent at 3,466.85 (close)
Tokyo – Nikkei 225: DOWN 0.9 percent at 21,521.53 (close)
Hong Kong – Hang Seng: DOWN 1.3 percent at 27,777.75 (close)
Shanghai – Composite: DOWN 0.7 percent at 2,932.51 (close)
Pound/dollar: UP at $1.2161 from $1.2152 at 2100 GMT
Euro/pound: DOWN at 91.08 pence from 91.80 pence
Euro/dollar: DOWN at $1.1075 from $1.1155
Dollar/yen: UP at 108.77 yen from 108.61
Brent North Sea crude: UP 0.7 percent at $65.17 per barrel
West Texas Intermediate: UP 0.9 percent at $58.58 per barrel
BSS/AFP/HR/1015