U.S. Stocks Turn Positive After Fed Comments -- Update
July 18 2019 - 2:32PM
Dow Jones News
By Lauren Almeida and Akane Otani
U.S. stocks broke into positive territory late Thursday after a
Federal Reserve official urged central banks to lower interest
rates swiftly on signs of economic weakening.
The Dow Jones Industrial Average rose 3 points, or less than
0.1%, to 27223. The S&P 500 was up 0.3% at a session high and
the Nasdaq Composite gained 0.2%.
Stocks drifted lower for much of the trading day, then got a
lift after John Williams, president of the Federal Reserve Bank of
New York, said "it pays to act quickly to lower rates at the first
sign of economic distress."
The comments from Mr. Williams, who is vice chairman of the
Fed's rate-setting Federal Open Market Committee, jolted markets,
sending Treasury yields and the U.S. dollar to session lows.
The two have drifted lower this year while stocks have climbed
as investors have bet that the Fed will make its first
interest-rate cut since the end of the financial crisis at the
conclusion of its July policy meeting.
To be sure, Mr. Williams didn't comment on the near-term outlook
for U.S. monetary or economic policy. But his comments nonetheless
sent market expectations for a half-percentage-point rate cut
higher, with federal funds futures showing a 51% probability of
such a cut in July -- the highest so far in 2019, according to CME
Group.
Earlier, corporate earnings drove swings in an otherwise quiet
trading day.
Netflix shed 10% after the video-streaming giant said late
Wednesday that its number of subscribers in the U.S. declined for
the first time in nearly a decade.
Equipment-rental company United Rentals lost 7.6% after
narrowing its full-year revenue outlook.
Other stocks fared better, with eBay rising 0.9% after the
online marketplace raised its profit outlook and notched
better-than-expected quarterly results.
Energy shares fell, following oil prices lower.
Crude began the trading session slightly higher but declined
later in the day as investors focused on a jump in fuel stockpiles
that came out in a government report Wednesday. Data showed that
gasoline inventories rose by 3.6 million barrels, setting off
worries about weakening demand for the fuel.
"The counter-seasonal gasoline build is especially concerning,"
said analysts at Houston-based Tudor, Pickering, Holt & Co.,
which also noted that gasoline exports were muted versus last
year.
Crude for August delivery fell 2.6% to $55.30 a barrel, logging
its fourth straight session of declines. Oil prices were down even
after Iran's Revolutionary Guard said that the country's forces
seized a foreign tanker, a sign that continued geopolitical
tensions in the Middle East could disrupt the flow of crude.
Elsewhere, the Stoxx Europe 600 fell 0.2%, weighed down by
declines among shares of technology and oil-and-gas companies.
While the European economy is doing well, "it's more about
downside risk coming from trade wars combined with the everlasting
Brexit risk," said Jorge Garyao, global head of inflation strategy
at Société Générale. The trade tensions that are currently focused
on U.S.-China "could easily move into the eurozone," he said.
In Asia, the Shanghai Composite Index fell 1%, notching its
third straight session of declines.
Progress toward a trade deal has stalled while the Trump
administration determines how to address Beijing's demands that it
eases restrictions on Huawei Technologies, people familiar with the
talks told The Wall Street Journal. No face-to-face meetings have
taken place or been scheduled since President Trump and President
Xi Jinping of China met last month in Japan and agreed to resume
talks.
Republican senators also are planning on introducing a bill that
would restrict Huawei from buying and selling U.S. patents,
according to draft text reviewed by The Wall Street Journal.
"Markets don't seem to be taking the comments on trade tensions
very well," said Fritz Louw, a currency analyst for Mitsubishi UFJ
Financial Group. He added that investors are likely to see several
days of volatility as they await progress in talks between China
and the U.S.
Japan's Nikkei Stock Average fell 2%, posting its biggest
one-day decline since March, after data showed exports tumbled for
the seventh straight month in June because of a sharp drop in
shipments of chip-making tools and automobile parts to China.
--Dan Molinski, Anna Isaac and Caitlin Ostroff contributed to
this article.
Write to Lauren Almeida at lauren.almeida@wsj.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
July 18, 2019 15:17 ET (19:17 GMT)
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