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Aug. 21, 2019, 4:34 p.m. EDT

Dow books 240-point gain as bond-market recession signal flashes after Fed minutes

Retailers’ quarterly results offer more evidence of consumer strength

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By Chris Matthews and Mark DeCambre, MarketWatch


Bloomberg News/Landov
Target helps to deliver a jolt to Wall Street sentiment

Stocks finished firmly higher Wednesday after minutes from Federal Reserve’s July 30-31 meeting offered few surprises and suggested that the central bank wanted to remain flexible in implementing policy changes.

How are the major benchmarks faring?

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.19%  rose 240.29 points, or 0.9%, to 26,202.73, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.0020%  climbed 23.92 points, or 0.8%, to 2,924.43, while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.07%  climbed 71.65 points, or 0.9%, to 8,020.21.

Read: Stock-market investors rattled by bond market’s ‘warning shot’—here’s what’s next

What’s driving the market?

The minutes of the Fed’s July meeting showed policy makers believed that “it was important to maintain optionality in setting policy.” The rate-setting Federal Open Market Committee voted 8 to 2 to lower its target for short-term interest rates by 25 basis points to 2%-2.25%, marking its first such rate reduction in more than a decade.

Most Fed members who supported the rate cut agreed with Fed Chairman Jerome Powell’s assessment that it was a “mid-cycle adjustment” and thus not the start of an aggressive monetary easing campaign.

Wall Street is pricing in a near-certain interest rate cut on Sept. 18 when the Federal Open Market Committee’s policy gathering concludes, based on federal-funds futures from the CME Group .

The Fed minutes come a day before the start of the central bank’s annual symposium in Jackson Hole, Wyo., which may provide more clarity to a market that appears convinced that policy makers will cut interest rates again.

“With hopes for Fed stimulus as the biggest driver of stocks’ buoyancy in the face of trade tensions and weakening global growth, today’s relatively dovish Fed minutes were about in line with investors’ high expectations,” said Alec Young, managing director of global markets research at FTSE Russell, in a note after minutes were released.

Stocks were up before the Fed minutes after results from retail giants buoyed investor sentiment. Target Corp .’s shares set a record following the discount retailer’s report of fiscal second-quarter earnings and sales that beat expectations. Target’s stock soared more than 19% in Thursday trading after its earnings provided analysts with further evidence that a combination of store and online sales is valuable. Similarly home-improvement retailer Lowe’s Cos . /zigman2/quotes/205563664/composite LOW -0.65% said its second-quarter net income rose to $1.68 billion, or $2.14 a share, from $1.52 billion, or $1.86 a share, with sales up 0.5% to $20.99 billion.

The results from the likes of Target and Lowe’s and Home Depot Inc . /zigman2/quotes/208081807/composite HD -1.17% on Tuesday, helped to quell, at least temporarily, worries that the domestic economy, buffeted by a China-U.S. trade policy clash, may soon see a recession.

Still, a closely watched spread between the 2-year Treasury yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.30% and the 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.25% inverted for the second time in about a week late Wednesday. The so-called yield-curve inversion, a condition where shorter-dated debt yields more than their longer-dated counterparts has preceded the past seven recessions.

Separately, President Donald Trump on Wednesday backtracked on a comment he had made about fiscal stimulus, saying he no longer thought cutting payroll taxes was a good idea.

On the economic data front, U.S. existing home sales rose by 2.5% to an annual rate of 5.42 million in July, the National Association of Realtors said Wednesday, above the median forecast of 5.40 million, according to a MarketWatch poll of economists.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,094.79
-52.29 -0.19%
Volume: 216.44M
Sept. 19, 2019 5:17p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
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/zigman2/quotes/205563664/composite
US : U.S.: NYSE
$ 111.87
-0.73 -0.65%
Volume: 2.43M
Sept. 19, 2019 6:30p
P/E Ratio
34.94
Dividend Yield
1.97%
Market Cap
$86.34 billion
Rev. per Employee
$230,029
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/zigman2/quotes/208081807/composite
US : U.S.: NYSE
$ 228.12
-2.71 -1.17%
Volume: 3.25M
Sept. 19, 2019 6:30p
P/E Ratio
22.72
Dividend Yield
2.38%
Market Cap
$249.83 billion
Rev. per Employee
$261,993
loading...
/zigman2/quotes/211347045/realtime
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullet Prebon
1.75
+0.0052 +0.30%
Volume: 0.00
Sept. 20, 2019 8:10a
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
1.79
+0.0045 +0.25%
Volume: 0.00
Sept. 20, 2019 8:10a
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