S&P 500 hits 3,000 points after Powell signals rate cut

Darnell Taylor
July 11, 2019

U.S. Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook's plan to build a digital currency called Libra "cannot go forward" until serious concerns were addressed.

In his testimony to the House Financial Services committee, Powell strongly signaled that the Fed would likely lower interest rates in the months ahead in part because trade disputes and a slowing global economy have created clouds of "uncertainty" that are weighing on the USA economy.

Powell has been under vast pressure from Donald Trump to cut rates.

"Concerns about the strength of the global economy continue to weigh on the United States outlook", Mr Powell said.

But the plan has already prompted calls in Europe for close regulatory scrutiny and several U.S. lawmakers have said they need more information from Facebook.

"Powell is setting it up, certainly for a July rate cut", Jack Ablin, chief investment officer at Cresset Capital Management in Chicago, told the Reuters news agency. But over the last decade, the Federal Reserve has been banging the inflation beehive with a baseball bat and the bees haven't come out. Short-term bond yields fell, and the U.S. dollar fell against a basket of other currencies.

The yield on the 10-year Treasury note fell slightly 2.046%, and the yield on the 2-year slipped to 2.205%.

Fed Chairman Jerome Powell told lawmakers in testimony Wednesday that the economic outlook hasn't improved since June's meeting.

The United States Federal Reserve is transmitting loud and clear that it intends to cut rates to support the USA and therefore global economy. The rate is now in a range from 2.25% to 2.5%.

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"Over the past four days we had gold pulling in from a high".

At the moment, the economic landscape is a mixed one: The U.S. job market appears resilient but overall economic growth is slowing with many forecasters predicting growth has slowed to around 2 per cent in the just completed April-June quarter.

The Fed last cut rates in 2008 at the height of the financial crisis. The Federal Reserve has apparently created a working group to track the development of the cryptocurrency, and is working with central banks in other nations as well.

His testimony specifically cited risks associated with trade conflicts (read: the US-China trade war) and lagging growth indicators in the global economy.

The bank believed that the US telecom giant is "positioned to sustain double-digit growth" in earnings over the next five years.

The two-year rate dropped nine basis points to 1.82%.

The Fed's skittish outlook for the economy - which meanwhile downplayed the risks of inflation despite a strong job market - sent stocks roaring as it strengthened the central bank's case to take action to prolong an 11-year expansion.

Fed staff concluded the rise in world tariffs had a likely "material" impact on the slowdown in global trade past year, and that "uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures". We have agreed to begin (trade) discussions again with China, and that is a constructive step.

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