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June 20, 2019, 4:25 p.m. EDT

S&P 500 closes at historic peak after Fed adopts easy-money posture

Geopolitical jitters cap upside

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By Sue Chang and Mark DeCambre, MarketWatch


Bloomberg
Stocks are capitalizing on a more accommodative Fed.

The S&P 500 closed at a record Thursday — its first all-time high in seven weeks — in a broad market rally, after the Federal Reserve signaled that an interest-rate cut may be forthcoming.

How did benchmarks fare?

The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.28% added 27.72 points, or 1%, to 2,954.18, after earlier touching a new intraday peak of 2,958.06.

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.09% rose 249.17 points, or 0.9%, to 26,753.17, coming about 75 points short of its record set on Oct. 3. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.40% climbed 64.02 points, or 0.8%, to 8,051.34, the first time it finished above 8,000 since May 6.

What drove the market?

Markets rallied after Federal Reserve Chairman Jerome Powell on Wednesday signaled that the central bank may cut benchmark interest rates, currently at a range of 2.25%-2.50%, in the coming weeks if the economic outlook buffeted by U.S.-China trade tensions doesn’t show signs of improvement.

“The case for somewhat more accommodative policy has strengthened,” Powell said at a news conference to discuss the rate-setting Federal Open Market Committee’s highly anticipated decision. Policy makers kept rates unchanged as expected but removed the word “patient” from its updated policy statement, suggesting that it is ready to act soon.

Although markets have been widely anticipating that the Fed would respond to growing signs of stress in the economy, the central bank’s posture on looser monetary policy was seen as providing a strong case for the continued rise in stocks despite concerns.

The Fed next meets July 30-31, while President Donald Trump is expected to speak to Chinese President Xi Jinping on the sidelines of the coming Group of 20 meeting of the world’s richest countries in Japan next week where a detente on trade could be reached.

See : Recap of Fed decision and Powell press conference

Geopolitical tensions partly dampened the market’s upbeat mood as President Donald Trump acknowledged the possibility of increased hostilities with Iran after the Islamic country shot down a U.S. drone. The president tweeted earlier that Iran “made a very big mistake” and said, “you’ll soon find out” if the U.S. decides to strike back.

Meanwhile, dovish rhetoric from central-bank policy makers across the globe this week has helped to send commodity prices, particularly gold, rocketing higher with heightened expectation that interest rates, which can undercut appetite for bullion, will be lowered.

Bank of Japan Gov. Haruhiko Kuroda and the Bank of England on Thursday joined the chorus of bankers including Powell and European Central Bank President Mario Draghi, signaling a readiness to increase stimulus should global risks, partly spurred by trade, worsen.

Key data drivers

The Philadelphia Fed manufacturing index in June fell to 0.3 after registering a four-month high of 16.6 in May. Any reading above zero indicates improving conditions. Economists polled by MarketWatch expected an 8 reading.

/zigman2/quotes/210599714/realtime
US : S&P US
2,997.95
+8.26 +0.28%
Volume: 1.60B
Oct. 17, 2019 4:06p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,025.88
+23.90 +0.09%
Volume: 220.21M
Oct. 17, 2019 4:06p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,156.85
+32.67 +0.40%
Volume: 1.68M
Oct. 17, 2019 4:06p
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